Economics
Patterns of world trade
Patterns of world trade refer to the recurring trends and characteristics of international trade flows between countries. These patterns are influenced by factors such as comparative advantage, specialization, and trade agreements. They can also be shaped by global economic conditions, technological advancements, and government policies. Understanding these patterns is crucial for analyzing the dynamics of global trade and its impact on economies.
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3 Key excerpts on "Patterns of world 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.
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.
- X. Zhang(Author)
- 1999(Publication Date)
- Palgrave Macmillan(Publisher)
9 China's Trade Patterns and Comparative Advantage Was China's foreign trade consistent with its comparative advantage in the late 1970s before the economic reform process began? Has the reform process led to a convergence between China's trade patterns and its underlying comparative advantage? The net export performance ratio (NEPR) and the domestic resource productivity (DRP) measures estimated in the previous chapters allow a further investigation into the relationships between China's trade patterns and comparative advantage. This analysis will reveal the impact of China's economic reforms on allocative efficiency in the tradable goods producing sectors. COMPARATIVE ADVANTAGE AND TRADE PATTERNS: THE DRP AND THE NEPR Trade theory suggests that if a country employs neutral trade policies its trade will follow its comparative advantage. In so doing, the country will be able to maximize the gains from trade. This also implies that domestic resources will be allocated across industries according to the country's comparative advantage. The relationship between a country's comparative advantage, trade patterns and production structure can be illustrated using Figure 9.1. This is a simple two-sector Heckscher±Ohlin model of a small economy. In isolation, the economy produces and consumes two goods X 1 and X 2 at point Y a of the production possibility frontier on the domestic relative price line P a . Suppose that the opportunity cost of producing X 1 is higher in the country than in the world, implying that the international relative price line P f is flatter than P a . The country, therefore, has a comparative advantage in X 2 and a disadvantage in X 1 . Given the existing production structure, if the country begins to trade with the rest of the world according to its comparative advantage± that is exports X 2 and imports X 1 ± it could increase its welfare by consuming at C t , and moving from the social indifference curve U a to a higher curve U t .
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