1 ECONOMICS 3150M Winter 2014 Professor Lazar Office: N205J, Schulich

2 Lecture 14: March 3 Ch. 21, 22, 2

3 International Trade Theory: Objectives Gains from trade Patterns of trade Volumes of trade Intra-corporate vs. inter-corporate/firm Protectionism – trade policies Free trade agreements – NAFTA, GATT

4 Critique of Traditional Trade Theory Competitive markets – underlying logic flawed Imperfect competition – competitive advantage Role of technology and risk taking – importance of market structure Culture, bureaucracy, hierarchy Politics and power – case of the US Bottom line: trade theory cannot explain RIM in Canada, Airbus in Europe, HSBC, Arcelor-Mittal in India, Emirates, IKEA, Samsung in South Korea, etc.

5 Overview 2012: –Global GDP: US$ 72 T –Global trade in goods and services: US$ 22 T World trade – merchandise exports (2010) –Total exports: US$14.9 T NA: $1.965 T (13%) South and Central America: $0.577 T (4%) Europe: $5,632 T (38%) Commonwealth of Independent States: $0.588 T (4%) Africa: $0.508 T (3%) Middle East: $0.895 T (6%) Asia: $4.686 T (32%)

6 Overview World trade – merchandise imports (2010) –Total exports: US$14.9 T NA: $2.508 T (17%) South and Central America: $0.587 T (4%) Europe: $5,844 T (39%) Commonwealth of Independent States: $0.399 T (3%) Africa: $0.453 T (3%) Middle East: $0.561 T (4%) Asia: $4.216 T (28%)

7 Overview Regional destinations of merchandise exports NAS&CAEuropeCISAfricaMEAsia NA49%8%17%1%2%3%21% S&CA Europe CIS Africa ME Asia

8 Overview World trade – merchandise exports NA25%17%18%13% S&CA10%4%3%4% Europe39%51%45%38% CIS4% 2%4% Africa6%5%2%3% Middle East 3%4% 6% Asia13%15%26%32% GATT70%84%89%94% WORLD$0.084$0.579$3.676$14.851

9 Overview World trade – merchandise imports NA20%17%21%18% S&CA8%4%3%4% Europe44%53%45%39% CIS3%4%1%3% Africa7%4%3% Middle East 2%3% 4% Asia15% 24%30% GATT67%86%90%96% WORLD$0.085$0.594$3.786$15.077

10 Overview World trade – merchandise exports by major product groups (2010) –Total exports: US$14.4 T Agricultural products: $1.362 T (9%) Fuels & mining products: $3.026 T (20%) –Fuels: $2.348 T (16%) Manufactures: $9.962 T (67%) –Iron & steel: $0.421 T (3%) –Chemicals: $1.705 T (12%) –Office & telecom equipment: $1.603 T (11%) –Autos: $1.092 (7%) –Textiles: $0.251 T (2%) –Clothing: $0.351 (2%)

11 Overview World trade: Merchandise exports by major product groups (2010) – Regional shares Agricultural products Fuels & mining products Manufacture NA16%10%14% S&CA1282 Europe CIS3121 Africa4111 Middle East2202 Asia221837

12 Overview Regional shares of merchandise exports by major product groups (2010) Agricultural products Fuels & mining products Manufacture NA11%15%69% S&CA Europe CIS86424 Africa Middle East26822 Asia61279

13 Overview Canada’s trade, by product (2010) –Exports Industrial goods and materials (metals and alloys; chemicals, plastics and fertilizer, etc.): $96.5 B (24%) Energy products: $90.9 B (22%) Machinery & equipment (includes aircraft): $76.1 B (19%) Automotive products: $56.8 B (14%) Agricultural and fishing products: $36.9 B (9%)

14 Overview Canada’s trade, by product (2010) –Imports Machinery & equipment: $113.9 B (28%) Industrial goods & materials: $86.9 B (21%) Automotive products: $68.7 B (17%) Other consumer products: $57.7 B (14%) Energy products: $40.5 B (10%)

Overview: Trade as % of GDP, 2008 Australia24% Belgium85 Canada34 Finland45 France28 Germany44 Ireland78 Italy29 Japan17 S. Korea54 Luxembourg156 Mexico29 Norway38 Portugal33 Slovak Rep.84 Spain30 Sweden50 Switzerland51 Turkey26 Russia26 UK30 US15 EU 2741 OECD29 15

Overview: Current Account Balance as % of GDP, 2010 Australia-2.6% Belgium1.0 Canada-3.1 Finland3.1 France-1.8 Germany5.6 Ireland0.5 Italy-3.2 Japan3.6 S. Korea2.8 Luxembourg7.5 Mexico-0.6 Norway12.9 Portugal-9.7 Slovak Rep.-4.0 Spain-4.6 Sweden6.3 Switzerland14.6 Turkey-6.4 RussiaNA UK-3.2 US

Overview: Services Balance as % of GDP, 2010 Australia-0.2% Belgium1.5 Canada-1.4 Finland1.2 France0.5 Germany-0.9 Ireland-4.6 Italy-0.6 Japan-0.3 S. Korea-1.1 Luxembourg54.7 Mexico-0.9 Norway-0.5 Portugal3.9 Slovak Rep.-1.2 Spain2.6 Sweden3.4 Switzerland8.8 TurkeyNA RussiaNA UK3.4 US1.0 17