Globalisation and International Trade

Globalisation and International Trade

1. Restricting Trade

   • Tariffs
     • a.k.a. customs duty
     • tax levied when a good is imported
     • specific
       • fixed charge
     • ad valorem
       • fraction
   • Import Quotas
     • quantity restrictions
     • license
     • quota rights
     • no gov revenue
       • goes to quota license holders
         • revenue = quota rents
   • Export subsidies
     • payment to firms for every unit exported
     • specific
       • per unit
     • ad valorem
       • proportion of value
     • gov rev falls
     • worsens terms of trade
     • CAP
       • EU
   • Import licensing
     • importers must obtain license
     • easier for gov to enforce restrictions
   • Voluntary export restraint
     • quota imposed by exporting company
     • usually requested by importing company
     • foreign gov / company profit
   • Other Instruments of Trade Policy
     • Dumping
       • sold at prices below MC
       • legal under WTO rules
     • Government Procurement
       • gov agencies must purchase domestically
     • Bureaucratic Regulations
       • e.g. quality regulations
     • Embargoes
       • total bans to certain countries
         • exports or imports
   • Arguments
     • for
       • protects infant industries
       • reduced reliance on goods with little dynamic potential
       • prevent dumping
       • prevent establishment of foreign-based monopoly
       • take account of externalities
       • protects declining industries
     • fallacious
       • "Imports reduce the standard of living"
       • "protection reduces unemployment"
       • "dumping is always bad for the importing country"
   • Trump
     • 25% tariff on steel imports
     • 10% tariff on aluminium imports

2. Terms of Trade

   • compares what price exports will fetch abroad with what we will have to pay for imports
   • ratio of export to import prices
   • Improved if...
     • the country is receiving more for its exports
     • the country is paying less for its imports

3. Costs of Trade

   • Increasing opportunity cost
   • Transport costs
   • Factors of production
   • Regulations / government restrictions

4. Specialisation

   • Absolute
     • one country can produce a good with less resources than another country
     • potentially mutually beneficial where trading opportunity arises
     • Absolute Trade Advantage
       • no longer any point trading
       • absolute advantage over both products
   • Comparative
     • an economy has the ability to produce goods and services at a lower opportunity cost than that of trade partners
     • always mutually beneficial
       • trade can still be beneficial if one country could produce all goods with less resources than the other
     • lowest opportunity cost

5. World Trade

   • Exports
     • China
       • $2049 billion
       • 11.1% share
     • USA
       • $1546 bilion
       • 8.4% share
     • Germany
       • $1407 billion
       • 7.6% share
     • Japan
       • $799 billion
       • 4.3% share
     • Netherlands
       • $656 billion
       • 3.6% share
     • UK ranked 11th
       • $474 billion
       • 2.6% share
   • Imports
     • USA
       • $2336 billion
       • 12.6% share
     • China
       • $1818 billion
       • 9.8% share
     • Germany
       • $1167 billion
       • 6.3% share
     • Japan
       • $886 billion
       • 4.8% share
     • UK
       • $690 billion
       • 3.7% share
   • rapid growth in world trade over last 60 years
   • growth in exports' share of GDP

6. UK International Trade

   • Exports
     • Cars
       • $42 billion
     • Gold
       • $31.6 billion
     • Turbo-jets
       • $24.9 billion
     • Crude Oil
       • $24.8 billion
     • Medication mixes in dosage
       • $18.9 billion
   • Imports
     • Cars
       • $42.7 billion
     • Crude Oil
       • $25.9 billion
     • Gold
       • $25.7 billion
     • Processed Petroleum Oils
       • $22.1 billion
     • Turbo-jets
       • $20.3 billion
   • 2018

7. Price Determination

8. Brexit

   • Sectoral Effect
     • Motor vehicles
     • EU main export market
   • Services
     • finance
     • insurance
     • 80% UK economy
   • Trade costs
     • financial trade agreements

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