Introduction to International Trade https://www.youtube.com/watch?v=geoe-6NBy10&list=PLuz72z1hNKh2Net-c5Vb3XxKyD_VghwsS – Crash course intro to international trade

International Trade Exports—goods and services produced in one country and sold to other countries. Imports—goods and services consumed in a country but which have been purchased from other countries. Trade Deficit (Surplus)—a country has a trade deficit (surplus) if its imports (exports) exceeds its exports (imports).

Index of Openness Index of Openness—a measure of how much a country participates in international trade; defined as the ratio of a country’s exports to its GDP (or GNP). Open Economy—a country with a high value of the index of openness. Closed Economy—a country with a relatively low index of openness.

Causes of Differences in Economic Growth of Countries Quantity and quality of resource endowments, particularly human capital Investment in plant and equipment (capital) Political and socioeconomic environment that is stable and conducive to competition

Growth of World Exports What has caused the explosion of world trade? Reduction in trade barriers Advances in transportation, communication and technology Proliferation of trade agreements

Geographic Trade Patterns Developed countries account for the bulk of world trade (largest exporters and importers). Developed countries trade primarily with each other. Developing countries rely on developed countries for their export markets. Countries trade mainly with neighbors.

TABLE 1.2 Top Ten Trading Partners of Selected Countries, 2007

GLOBALIZATION Globalization is the term used to convey the idea that international factors are becoming a more important part of the world economy The simplest measure of globalization is the ratio of exports to GDP Countries with a high ratio of exports to GDP are generally more open to the world economy than countries with a low ratio

GLOBALIZATION Globalization or the increasing openness of an economy, means changes that are not universally positive Globalization involves not only the goods and service but the movement of people and money as well International transactions occur because both parties expect the transaction to improve their welfare