1. GS 120 – iGlobalization: Moving The Things We Buy Professor: Dr. Jean-Paul Rodrigue Hofstra University, Department of Global Studies & Geography Topic 3 – Trade and the Global Economy A – International Trade B – Trade Facilitation C – Global Trade Patterns

2. A – International Trade

3. Trade and the Global Economy ■Interdependencies In a global economy, no nation is self-sufficient. All involved at different levels in trade: Sell what they produce. Acquire what they lack. Produce more efficiently in some economic sectors. Historical growth: Occurred at an ever increasing scale over the last 500 years. Significant technical improvements. Possible to trade between parts of the world that previously had limited to international transportation systems. Division and the fragmentation of production expanded trade. Decoupling between economic and trade growth.

4. Trade and the Global Economy AttributeFunction Economic efficiency Lower productions costs (cheaper inputs). Achieve economies of scale (larger markets). Accessibility of capital, labor and resources Huge variety of resources being made accessible. Raw materials, energy, goods, food and labor. Exchanges of capital, merchandises, raw materials and services. Interdependencies Increased spatial interdependencies between elements of the world-system. The more integrated economies are, the more they trade. Indirectly promote harmonious relations.

5. Economic Rationale of Trade

6. Favorable and Contentious Factors in International Trade

7. Trends Shaping International Trade

8. World Merchandise Trade, 1960-2011

9. Global Trade and Container Throughput (1970=100) 520.4 Millions TEU $63.4 Trillion $15.2 Trillion 6.84 Billions

10. Monthly Trade between China and the United States, Billions of USD (1985-2011)

11. B – Trade Facilitation

12. The “Four Ts” in International Trade Transaction costs Tariff and non-tariff costs Transport costs Time costs

13. The Functions of Trade Facilitation

14. Trade Facilitation Integration Processes Harmonization of regulatory regimes. Formation of economic blocs (Common tariffs and regulations). Production systems More flexible and embedded. Promotes exchanges of commodities and services. Transport efficiency Improvements in modes and infrastructure. Decrease in transport costs. The transferability of commodities has improved. Standardization Common frame of reference over information and physical flows. Reliable, interoperable and compatible goods and services. Measurement units. Transactional efficiency Credit for international transactions (letters of credit). Insurance for cargo (damage, theft, delays). Currency exchange. Telecommunications and information exchange.

15. Levels of Economic Integration Free trade between members: NAFTA, Mercosur, ASEAN (partial) Free Trade Common external tariffs Customs Union Factors of production move freely between members Common Market Common currency, harmonized tax rates, common monetary and fiscal policy: EU (partial) Economic Union Common government Political Union Level of integration Complexity

16. Economic Integration Levels, 2011

17. China’s Special Economic Zones

18. Yuan Exchange Rate (per USD), 1981-2012 (Monthly)

19. Phases of the Export-Oriented Paradigm Phase IPhase IIPhase III Capital Currency devaluation. Mostly Foreign Direct Investments (FDI). Surge in FDI, but growing share of national capital. Pressures to revalue currency. Drop in FDI. National capital dominant. Providing FDI to other markets. Production Numerous comparative advantage. Focusing on labor intensive activities. Gradual shift to added value production. Loss of comparative advantages in labor intensive activities. Growing importance of the national market. Trade Growth of exports and widening trade balance (imports versus exports). Peak trade growth and imbalances. Re-balancing. Relative decline of the share exports in relation to imports. Transportation Modernization of existing gateways. Massive investments in new transport terminals, mostly ports and airports. Focus on inland transportation.

20. C – Global Trade Patterns

21. International Trade, Transportation Chains and Flows Transport Chain Maritime International Trade Physical Flows A B A Rail Transshipment Composition Transshipment Hub B Road Decomposition Customs Port Distribution Center Rail Yard A B Origin Destination Custom Procedures

22. Changes in the Global Trade Patterns StageNatureFunction Until the 1970s Immobile factors of production Cope with scarcity Late 20 th century Mobility of factors of production Promote economic efficiency Early 21 st century Global production networks Added value within commodity chains Immobile Factors of Production Mobility of Factors of Production Global Production Networks Bulk point-to-point Container shipping Country A Country B Global Market Commodity chain Commodity Market

23. Changes in the Value World’s Merchandise Trade, Production and GDP, 1950-2010 (in %)

24. Monthly Value of Exports or Imports, Selected Traders, 2006-2011 (Jan 2006=100)

25. Share of World Goods Exports, Leading Exporters, 1950- 2010

26. Share of Product Groups in World Merchandise Trade, 1900-2008

27. Freight Transport Costs as Share of Commodity Market Value 1970198019902007 Jute (Bangladesh) 12.1%19.8%21.2%44.2% Tea (Sri Lanka)9.5%9.9%10.0%13.4% Coffee (Columbia) 4.2%3.3%6.8%2.5% Cocoa beans (Ghana) 2.4%2.7%6.7%3.5%

28. Share of Merchandise Exports by Region, 1948-2010

29. World’s 12 Largest Exporters and Importers, 2010

30. American Foreign Trade by Maritime Containers, 2010 (in TEUs)

31. Global Trade, 2009