Economics
Pattern of Trade
A pattern of trade refers to the specific mix of goods and services that a country exports and imports. It is influenced by factors such as comparative advantage, resource endowments, technological capabilities, and government policies. Understanding a country's pattern of trade is important for analyzing its economic strengths and weaknesses, as well as for formulating trade policies.
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4 Key excerpts on "Pattern of Trade"
- Shad Morris, James Oldroyd(Authors)
- 2023(Publication Date)
- Wiley(Publisher)
Bronek Kaminski/Getty Images LEARNING OBJECTIVES After you explore this chapter, you will be able to: 1. Compare theories about why countries trade. 2. Describe trade imbalances and their consequences. 3. Identify patterns of trade such as regionalization. 4. Classify government policies that affect trade patterns. Trade Theories CHAPTER 7 INTRODUCTION World trade in goods and service totals nearly $8 trillion a year. This is quite different from just a generation ago when world trade was less than $2 trillion (see Figure 7.1). The rapid growth in trade is significant; trade now represents over a quarter of the world’s GDP. For some people, the idea of world trade evokes fear. They believe jobs and opportunities are being lost to competitors in other countries because of increased trade. Many global leaders argue for decreasing global trade and halting the loss of jobs from their home countries to other markets. Others believe trade increases specialization, which increases quality and output, increasing the standard of living for everyone. Regardless of your feelings about world trade, most countries depend on it through the importing of energy, food, and goods and services. For instance, trade is roughly 40 percent of Saudi Arabia’s GDP, a result of the country trading its abundant oil. Hong Kong’s trade as a percentage of its GDP is the second highest in the world at 188 percent. On the other 7.1 Theories of Trade 141 hand, only 27 percent of the U.S. GDP comes from trade. 1 Regardless of the proportion of trade in a country, international commerce is a major part of the economic activity of most countries. 7.1 THEORIES OF TRADE LEARNING OBJECTIVE Compare theories about why countries trade. International trade has been an important force in the world for thousands of years. Throughout the ages, different theories have directed governments’ approach to international trade.
- X. Zhang(Author)
- 1999(Publication Date)
- Palgrave Macmillan(Publisher)
In addition, the trends that have emerged since 1993 possibly indicate the directions of important changes that are most likely to occur in China's trade patterns in the years to come. CONCLUSIONS Foreign trade is no longer a residual of the central economic plans and its growth is no longer limited by the shortages or surpluses inherent in the 66 China's Trade Patterns economic plans (Hsu 1989). This change has been most obviously reflected in the changes in the commodity patterns of trade. The abolition of the centrally controlled trade system, combined with other reform measures, has created an environment in which enterprises are able to respond vigorously to market signals and various incentive schemes; export and import decisions can now be made at the lower levels and profit-making has become a more important motive for trading. All these changes do not necessarily mean that China has already established an efficient system of foreign trade. The foreign trade system is still only partially reformed; more importantly, the ultimate success of the foreign trade reforms depends largely on reforms of the economy as a whole. For instance, the mismatch of the domestic price structure with that in the international market makes it very difficult, if not impossible, for independent enterprises to operate efficiently across the boundaries of the two systems without causing large disturbances to the structure of the domestic economy. This is the dilemma that has constantly confronted trading companies and tradable goods producers during the reform period.
eBook - PDF- Shad Morris, James Oldroyd(Authors)
- 2020(Publication Date)
- Wiley(Publisher)
Statista. Reprinted with permission of Statista,Inc. Theories of Trade 113 Regardless of your feelings about world trade, most countries are dependent on it, import- ing energy, food, and goods and services. For instance, in 2018 trade was 39 percent of Saudi Arabia’s GDP, a result of the country trading its abundant oil. In 2018, Hong Kong’s trade as a percentage of its GDP was the second highest in the world at 188 percent. On the other hand, only 27 percent of the U.S. GDP comes from trade. 1 Regardless of the proportion of trade in a country, international commerce is a major part of the economic activity of most countries. LEARNING OBJECTIVES After you explore this chapter you will be able to: 1. Compare theories about why countries trade 2. Describe trade imbalances and their consequences 3. Identify patterns of trade such as regionalization 4. Classify government policies that affect trade patterns 7.1 Theories of Trade LEARNING OBJECTIVE Compare theories about why countries trade. International trade has been an important force in the world for thousands of years. Throughout the ages, different theories have directed governments’ approach to international trade. These approaches can be categorized into different theories that explain why countries trade. We will now explore these theories. Interventionist Theories Since antiquity, trade patterns have been shaped by the sovereign nation-states in which trading companies operated. These companies were heavily dependent on government support. In fact, they often were owned by those governments and their activities were used to promote the ruler’s specific objectives, usually building up gold reserves to fill the national treasury. Mercantilism. In 1519 the Spanish conquistador Hernán Cortés sailed from the island of Hispaniola in the West Indies to conquer the interior of Mexico for the Spanish Empire.
eBook - PDF- Peter B. Kenen(Author)
- 2000(Publication Date)
- Cambridge University Press(Publisher)
PART TWO INTERNATIONAL TRADE THEORY AND POLICY 2 Comparative Advantage and the Gains from Trade THE ISSUES This chapter introduces the main methods of trade theory and uses them to study three basic issues: • Why countries trade and how they gain from trade. • How trade affects the allocation of domestic resources in each trading country. • How tariffs and other trade barriers affect the gains from trade and modify the allocation of resources. The chapter begins by using demand and supply curves to analyze the principal effects of trade, then introduces more powerful techniques. PRICES AND TRADE PATTERNS Differences in prices from country to country are the basic cause of trade. They re fl ect differences in costs of production. Trade serves in turn to minimize the real resource costs of worldwide production, which is the same as saying that trade serves to maximize the real value of production by allocating worldwide resources most ef fi ciently. It does so by permitting and encouraging producers in each trading country to specialize in those economic activities that make the best use of their country’s physical and human resources. Why should costs differ from country to country? How can Japan produce cars, cameras, and computers more cheaply than the United States? Many people would reply that Japan has lower costs because it has lower wage rates, and wages are important costs. This explanation sounds plausible enough, but it is inadequate. If wage rates were decisive for cost differences and trade, Japan would undersell the United States in every product line and market. Yet Japan imports many products from the United States, from aircraft to grain, and 19 20 Comparative Advantage and the Gains from Trade other countries with much lower wage rates than Japan import many American products. Differences in wage rates by themselves cannot explain trade patterns.
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