Trade Choices You have $1,000 to spend and your alternatives are: Purchase 1 U.S.-made television and 1 U.S.-made bicycle. or Purchase 1 Chinese-made television, 1 Korean-made bicycle and 2 cases of French wine. or Purchase $1,000 of stock in a Canadian company. Which do you choose?

Voluntary Trade Creates Wealth

Example 1

Win - Win

Win – Win ?

Win – Win ??

Win – Win ???

Apples and Oranges Apple price $.70/lb Orange Price $.70/lb Washington Grower 20 acres yields Apples 50 bu/acre Oranges 1bu/acre Florida Grower 20 acres yields Apples 2bu/acre Oranges 40 bu/acre Trade & Comparative Advantage – Example

RankCountryExportsImportsTotal Trade % of Total Trade ---Total, All Countries , % 1Canada % 2China % 3Mexico % 4Japan % 5Germany % 6Korea, South % 7United Kingdom % 8France % 9Saudi Arabia % 10Brazil % Top 10 U.S. Trade Partners, Total Trade, Year to Date (May, 2014) US$, bn, unrevised

RankCountry Imports % of Total Imports ---Total, Top 15 Countries % 1China % 2Canada % 3Mexico % 4Japan % 5Germany % 6Korea, South % 7Saudi Arabia % 8U.K % 9France % 10India % Country Exports % of Total Exports Total, Top 15 Countries % Canada % Mexico % China % Japan % U.K % Germany % Korea, South % Netherlands % Brazil % Hong Kong % U.S. Trade, Imports & Exports, Year to Date (May, 2014) US$, bn, unrevised

RankCountrySurplus 1Hong Kong14.5 2Netherlands8.8 3United Arab Emirates 7.6 4Australia6.7 5Brazil6.5 6Singapore6.1 7Belgium5.3 8Panama4.2 9Argentina2.7 10Egypt2.6 RankCountryDeficit 1China Germany-6.6 3Japan-5.1 4Mexico-4.3 5Canada-2.8 6Korea, South-2.7 7Saudi Arabia-2.7 8India-2.4 9Ireland Italy-2.1 U.S. Trade Surplus & Deficit, Year to Date (May, 2014) US$, bn, unrevised

Balance of Payments

Example

The Data

The Balances

Trade Deficit

International Comparisons of Hourly Compensation Costs in Manufacturing