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    Case Study: Trade Is Important

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    Diệu Linh
    This document provides an overview of key facts about international trade. It shows that in 2012, world trade totaled nearly $23 trillion, with industrialized countries contributing over half. About half of global trade involves manufactured goods, while primary products and services each make up around a quarter. Industrialized countries export relatively more manufactured and fuel products, while developing countries export more primary goods and textiles. The importance of trade for different countries' economies is shown by the ratio of their total trade to GDP, which has increased significantly from 1970 to 2012 for all countries listed.

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    Case Study: Trade Is Important

    Uploaded by

    Diệu Linh
    13 views2 pages
    This document provides an overview of key facts about international trade. It shows that in 2012, world trade totaled nearly $23 trillion, with industrialized countries contributing over half. About half of global trade involves manufactured goods, while primary products and services each make up around a quarter. Industrialized countries export relatively more manufactured and fuel products, while developing countries export more primary goods and textiles. The importance of trade for different countries' economies is shown by the ratio of their total trade to GDP, which has increased significantly from 1970 to 2012 for all countries listed.

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    mini case - role of trade

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    Case01_Role of Trade

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    This document provides an overview of key facts about international trade. It shows that in 2012, world trade totaled nearly $23 trillion, with industrialized countries contributing over half. About half of global trade involves manufactured goods, while primary products and services each make up around a quarter. Industrialized countries export relatively more manufactured and fuel products, while developing countries export more primary goods and textiles. The importance of trade for different countries' economies is shown by the ratio of their total trade to GDP, which has increased significantly from 1970 to 2012 for all countries listed.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    13 views2 pages

    Case Study: Trade Is Important

    Uploaded by

    Diệu Linh
    This document provides an overview of key facts about international trade. It shows that in 2012, world trade totaled nearly $23 trillion, with industrialized countries contributing over half. About half of global trade involves manufactured goods, while primary products and services each make up around a quarter. Industrialized countries export relatively more manufactured and fuel products, while developing countries export more primary goods and textiles. The importance of trade for different countries' economies is shown by the ratio of their total trade to GDP, which has increased significantly from 1970 to 2012 for all countries listed.

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    of 2

    Chapter 2 The Basic Theory Using Demand and Supply 17

    Case Study Trade Is Important

    To understand stories about how trade works, relatively less of primary products, especially
    it is useful to know some of the key facts about fuels. In manufactured products, industrialized
    trade. A good start is a broad overview of the countries export relatively more of chemicals,
    products traded and trade’s growing importance. while developing countries export relatively more
    How large is international trade? What prod- of textiles and clothing. Industrialized countries
    ucts are traded? The table below shows exports are relatively strong in exporting services. We will
    by major product categories, for the world overall use this kind of observation—looking at trade
    and for two broad economic groups of countries, across product categories—as we examine why
    the industrialized (or developed or advanced) countries trade with each other.
    countries and the developing countries. How important is international trade in the
    In 2012, world trade was nearly $23 trillion, economies of various countries? The second table
    with the industrialized countries contributing in this box examines one measure of the impor-
    a little over half of world exports. Most goods tance of trade to a country, the ratio of the sum
    are traded across national borders, as are many of a country’s total trade (exports plus imports)
    services, including transportation, computer and to the country’s gross domestic product (GDP, a
    information services, as well as insurance, con- standard way of measuring the size of a country’s
    sulting, and educational services. For the world, economy). These measures are not completely
    about half of trade is in manufactured products, comparable (exports and imports measure full
    with the rest of trade split between primary prod- sales values, while GDP measures value added).
    ucts and services. By comparing the details across Still, they provide a reasonable way of comparing
    the columns, we can see that the broad pattern the importance of trade across time and across
    of exporting by the industrialized countries has countries.
    some differences from the pattern for develop- Here are a few observations about what we
    ing countries. Industrialized countries export see in this table. First, for each of the countries

    Exports, 2012 (billions of U.S. dollars)


    Industrialized Developing
    World Countries Countries
    Total 22,777 12,283 10,494
    Primary products 6,293 2,454 3,839
    Agricultural 1,666 942 724
    Fuels 3,451 927 2,524
    Ores 1,176 585 590
    Manufactured products 11,486 6,426 5,060
    Chemicals 1,945 1,349 596
    Machinery and transport equipment 5,829 3,247 2,582
    Textiles and clothing 733 213 520
    Other 2,979 1,617 1,362
    Services 4,426 2,951 1,475

    Note: Sum of primary products, manufactured products, and services does not equal total because of a
    small amount of unclassified goods.
    Source: UNCTAD, UNCTADStat.
    —Continued on next page
    18 Part One The Theory of International Trade

    Exports Plus Imports as a Percentage of GDP rising international transactions increasingly link
    together what had been relatively separate
    1970 2012
    national economies. Second, trade tends to be
    United States 11.1 30.4 more important for countries with smaller econ-
    Canada 42.0 62.1 omies (such as Canada and Denmark) and some-
    Japan 20.3 31.3 what less important for very large economies
    France 31.1 57.1 (such as the United States and Japan). Third,
    United Kingdom 43.6 65.3 both China and India have gone from being
    Australia 25.9 41.5 mostly closed to trade to much more open and
    Denmark 57.3 104.5 involved. The experiences of China and India in
    China 5.3 51.3 the past several decades are rather close to the
    India 8.0 55.4 approach we will take in Chapters 2–7—imagin-
    Korea 37.7 109.9 ing a national economy with no trade and then
    Brazil 14.9 26.5 drawing out what will happen when the country
    opens up to free trade.
    Source: International Monetary Fund, International
    Financial Statistics. DISCUSSION QUESTION
    shown in the table (and for most other coun- Given the trends shown here, do you think that
    tries), international trade has become more international trade should have become more
    important. Trade’s increasing importance is one controversial or less controversial than it was
    part of the process of globalization—in which several decades ago?

    Figure 2.1A, the consumer surplus is the difference between the total value to consum-
    ers (area c 1 t 1 u) and the total payments to buy the product (area t 1 u). Consumer
    surplus thus is equal to area c, the area below the demand curve and above the price
    line. This contribution to the economic well-being of consumers through the use of
    this market is $32 million, equal to (1/2) 3 ($3,600 2 $2,000) 3 40,000.
    A major use of consumer surplus is to measure the impact on consumers of a change in
    market price. For instance, what is the effect in our example if the market price of motor-
    bikes is $1,000 instead of $2,000? Consumers are better off—they pay a lower price and
    decide to buy more. How much better off? Consumer surplus increases from a smaller
    triangle (extending down to the $2,000 price line) to a larger triangle (extending down
    to the $1,000 price line). The increase in consumer surplus is area t 1 d. This increase
    can be calculated as the area of rectangle t, equal to ($2,000 2 $1,000) 3 40,000, plus
    the area of triangle d, equal to (1/2) 3 ($2,000 2 $1,000) 3 (65,000 2 40,000). The
    increase in consumer surplus is $52.5 million. The lower market price results in both an
    increase in economic well-being for consumers who would have bought anyway at the
    higher price (area t) and an increase in economic well-being for those consumers who
    are drawn into purchasing by the lower price (area d).
    Supply
    What determines how much of a product is supplied by a business firm (or other pro-
    ducer) into a market? A firm supplies the product because it is trying to earn a profit

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