1. ECON 331 International Trade and economics introduction

2. 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).

3. 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.

4. 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

5. 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

6. World Exports and Output in Real Terms: 1950–2007

7. 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.

8. Trading Partners of Selected Countries

9. Commodity Composition
Top three most traded products
Petroleum
Office machines, computers, and parts
Automobiles
Increased role of global production (or outsourcing)

10. World Trade in Major Products: 1994, 1999, 2003, 2006 (value in billions of $, percent share)

11. 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

12. Real Export plus Imports as a Percent of GDP
Trade Openness
Exports Plus Imports as a Percentage of GDP for Selected Countries
Country
Real Export plus Imports as a Percent of GDP
Singapore
462.9%
Hong Kong
334.4
Luxembourg
282.0
Hungary
180.0
Ireland
176.7
Belgium
174.0
Netherlands
146.9
Taiwan
118.1
Honduras
109.7
Philippines
107.7
Austria
103.0
Costa Rica
96.4
Korea
95.5

13. Real Export plus Imports as a Percent of GDP
GLOBALIZATION
Exports Plus Imports as a Percentage of GDP for Selected Countries
Country
Real Export plus Imports as a Percent of GDP
Denmark
94.5
Switzerland
90.7
Sweden
88.9
Canada
81.8
Indonesia
81.7
Portugal
79.9
Nicaragua
79.3
Iceland
78.9
Israel
78.3
Finland
77.9
Ecuador
76.9
Germany
76.6
Norway
76.4

14. Real Export plus Imports as a Percent of GDP
Trade Openness
Exports Plus Imports as a Percentage of GDP for Selected Countries
Country
Real Export plus Imports as a Percent of GDP
Turkey
71.2
Chile
71.1
Poland
69.5
Mexico
66.8
Spain
65.1
U.K.
59.9
France
57.5
Italy
54.5
China
54.4
South Africa
Greece
54.3
Australia
48.9
U.S.
26.6
Japan
23.4

15. GLOBALIZATION
Real World Exports of Goods as a Percentage of Real World GDP
25% –
20% –
15% –
10% –
5% –
0% –
1975
1980
1985
1990
1995
2000
2005
Exports as a Percent of GDP

16. 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

17. TOP 10 EXPORTERS (2015)

18. The top ten merchandise traders accounted for 52% of the world’s total trade in 2015.
Merchandise exports of WTO members totalled US$ 16.2 trillion in 2015.
The share of developing economies in merchandise exports increased from 33% in 2005 to 42% in 2015

19. SOME NOTES FROM GLOBAL TRADE
Asia, Europe and North America have accounted for 88%in total merchandise trade of WTO members over the past ten years

20. Sources of Trade Data United Nation COMTRADE data base
Internet access at
Other publications (e.g. UN Yearbook of International Trade Statistics, Country Profiles
Commodity trade data bases for member countries
World Trade Organisation (
IMF Direction of Trade: aggregate national trade flows (
OECD (
European Statistical Agency: COMEXT data base
International Trade Center Database INTRACEN (

21. Trade Data Collection
United Nations Statistics Division (UNSD, collects trade data provided by UN member countries according to the Standard International Trade Classification (SITC) system
The Standard International Trade Classification (SITC)
Classifies trade flows into different product categories
Product-based, not industry-based => each category involves some aggregation of products of different industries

22. LEVELS OF AGGREGATION 10 sections (‘1-digit’): most aggregated,
0- Food and live animals
1-Beverages and tobacco
2-Crude materials, inedible, except fuels
3-Mineral fuels, lubricants and related materials
4-Animal and vegetable oils, fats and waxes
5-Chemicals and related products, n.e.s
6-Manufactured goods classified chiefly by material
7- Machinery and transport equipment
8-Miscellaneous manufactured articles
9-Commodities and transactions not classified elsewhere in the SITC
67 divisions (‘2-digit’), e.g. metalworking machinery (73)
262 groups (‘3-digit’), e.g. ‘Machine tools working by removing metal or other material’ (731)
1023 subgroups (‘4-digit’), 2970 items (‘5-digit’)

25. Data on Country Characteristics
United Nations, Yearbook of National Account Statistics: national accounts data (GDP)
International Labour Organization (ILO), Yearbook of International Labour Statistics: labour market data (labour force, wages, educational attainment …)
UN Food and Agriculture Organization (FAO), Statistical Yearbook: data on food production, soil quality etc.
World Bank, World Tables: mostly general macroeconomic series (GDP, industrial structure, population …)
IMF, International Financial Statistics: focus on financial data (current account, exchange rates …)
ILO, WB and IMF data all accessible via ESDS International