ANHUI UNIVERSITY OF FINANCE & ECONOMICS Chapter 1 Introduction to International Economics INTERNATIONAL ECONOMICS Professor Xu Song ANHUI UNIVERSITY OF FINANCE & ECONOMICS 0552-3179196(O) aiftxs@163.com

Books on International Economics Dominick Salvatore: International Economics, 8th ed. 2004 John Wiley & Sons Inc. & Tsinghua Uni. Press Dennis R. Appleyard & Alfred J. Field. Jr.. International Economics, 6th ed., 2007 The McGraw-Hill, Inc. Robert J. Carbaugh: International Economics, 10th ed. 2006 South-Western College Pub. Paul R. Krugman & Maurice Obstfeld International Economics, 5th ed. 2000 Addison Wesley & Tsinghua Uni. Press

Professor at Fordham Uni. of New York City Dr. Dominick Salvatore Professor at Fordham Uni. of New York City

Contents 1 Introduction 2 The Law of Comparative Advantage 3 The Standard Theory of International Trade 4 Offer Curves and Terms of Trade 5 Factor Endowments and the H-O Theory 6 Economies of Scale, Imperfect Competition 7 Economic Growth and International Trade 8 Trade Restrictions 9 Nontariff Trade Barriers 10 Economic Integration 11 International Trade and Economic Development 12 International Movement and MNCs

Contents of Each Chapter Six Sections in each chapter Summary ----- 6 paragraphs A Look Ahead--- What is to be discussed in the next chapter Key Terms Questions for Review----13 Questions Problems---- 13 Problems. Appendix----- More advanced knowledge.

Introduction Chapter 1

1 Introduction Know the importance of international economics Define the definition of foreign trade dependence learn the relationship between international trade and the standard of loving Know the purposes of international economic theories and policies

1 Introduction Interdependence New protectionism Balance of payment Foreign exchange market Adjustment in the balance of payments Open-economy macroeconomics

2 International Economics Chapter 1 Introduction to International Economics 2 International Economics It deals with the economic interdependence among nations. It analyzes the flow of goods and services, payments between nations, policies regulating the flow and their effects on national welfare.

2 International Economics Trade Theory International Economics International Finance International Trade Policy

2.1 International Trade Theory Heckscher-Ohlin Stolper-Samuelson Factor Price Equalisation Comparative Advantage Trade Theory Rybzcynski Absolute Advantage Mercantilism Immiserising Growth International Trade and Economic Development

2.2 International Trade Policy Other Trade Policies Regional Trade Agreements International Trade Policy Tariffs International Resource Movements Tools of the Trade Policy Analysis

2.3 International Finance Balance of payments Foreign exchange markets International Finance Open economy macroeconomics

2.4 Purpose to Study International Economics To analyze the effect of the int’l flow of goods, services and factors on the welfare of domestic consumers. To examine or forecast how national policies directed at regulating these int’l flows affect domestic welfare. To form intelligent opinions on these matters. To predict and explain the economic events in the world. To understand what is going on in the world and their effects on the world economy. To have a better job in joint ventures !!! Why ?

3 Assumptions in International Trade Chapter 1 Introduction to International Economics 3 Assumptions in International Trade 2×2×2 model No trade restrictions Perfect mobility of factors within nations and not internationally Perfect competition No transportation costs

4 Foreign Trade Dependence Chapter 1 Introduction to International Economics 4 Foreign Trade Dependence What is foreign trade dependence? What is the purpose? How to measure it? -----The ratio of imports and exports of goods and services of a nation to its GDP. What nations have the higher degree of foreign export trade dependence?

4.1 Foreign Trade Dependence in Some Nations 1970 1980 1990 1993 Developing countries India 3.5 5.0 6.0 8.6 Indonesia 11.5 28.1 24.2 23.2 Korea 9.3 27.5 25.6 24.8 Pakistan 4.0 11.1 14.0 12.9 Thailand 10.0 20.1 26.9 29.5 Advanced countries Japan 9.5 12.3 9.8 Canada 19.8 25.7 22.5 26.6 America 4.2 8.3 7.2 7.4 France 12.5 17.5 17.6 16.5 Germany 18.6 23.8 27.4 19.9 Italy 17.3 15.6 16.9 United Kingdom 15.7 20.5 19.0 19.3 Singapore 180

4.2 Importance of International Trade Some nations can not survive without foreign trade, such as Japan, Germany, Belgium and others. A nation can not produce all the products it needs, for example, US can not produce coffee, cocoa, tea, scotch and other products, they don't have the climate. The economies of all nations are closely related to each other. To improve the standard of living.

4.3 China GDP and Foreign Trade Dependency Year GDP (bill. ￥) Exp+Imp (bill. $) Export Import Balance ($) 1997 7477.2 325.16 36.0% 182.79 20.3% 142.37 15.7% +404.2 1998 7834.5 323.95 33.7% 183.71 19.1% 140.24 14.6% +434.2 1999 8206.7 360.63 36.4% 194.93 19.7% 165.70 16.7% +292.3 2000 8944.2 474.30 44.0% 249.20 23.0% 225.09 21.0% +241.1 2001 9593.3 509.77 45.0% 266.15 24.0% 243.61 +225.4 2002 10239.8 620.80 50.3% 325.57 26.4% 295.22 23.9% +303.5 2003 11669.4 851.21 60% 438.37 31.09% 412.84 29% +255.4 2004 13651.5 1154.7 69.3% 593.4 35.6% 561.4 +320.0 2005 15000 1422 80% 762.0 43.0% 660.1 37% +101.9 2006 24662 1760.7 67% 969.1 36.9% 796.6 30.3% +177.5 Data source: China Customs

5 Some Questions 1. Import/GDP has _______in recent years in China. (risen, fallen, remained steady) (From 15.7 % in 1997 to 37 % in 2005.) 2. Export/GDP has _______in recent years. (From 20 % in 1997 to 40 % in 2005.) 3. Which nation is our largest trading partner? ( EU:217.3 billion dollars in 2005) 4. Which is the second largest trading partner? (US: 211.6 billion dollars in 2005 )

5 Some Questions (2) 5.The purpose of trade is to_______. a. improve consume well-being. b. create jobs. 6. Work is a ________. a. cost b.benefit 7. Exports are ________. 8. The objective of international trade is to __________. a. get goods cheaply b.create jobs 9. NAFTA has had a greatest impact on the _____ of U.S. a. inflation rate b.unemployment rate

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