Transcript The Dynamic Environment of International Trade

Economic Analysis And
Trade Barriers
Economic Analysis
I . Theories of International Trade
(1) Comparative Advantage
(2) International Product Life Cycle
(3) Production Sharing
(4) Internalization
The Dynamic Environment of
International Trade
II. Players in the World’s Economy
- G7
- NICS
- LDCS
World Population Top 10-1995
In Millions
India: 939
China: 1,208
United States:
263
Indonesia: 194
Brazil: 162
Russian
Federation:
150
Pakistan: 131
Rest of World:
2,397
Japan: 126
Taiwan: 124
Bangladesh:
122
World Population Top 10-2020
In Millions
India: 1,578
China: 1,711
United States:
329
Indonesia: 303
Pakistan: 280
Brazil: 260
Nigeria: 227
Bangladesh:
210
Rest of World:
3,907
Russian
Federation: 165
Taiwan: 162
World GNP Top 10-1995
In Billions
Japan: $4,247
Germany:
$1,999
France: $1,352
United States:
$6,659
Italy: $1,183
U.K.: $1,076
China: $677
Rest of World:
$6,255
Canada: $595
Spain: $570
Brazil: $484
World GNP Top 10-2020
In Billions
Germany:
$3,707
Japan: $10,037 China: $4,126
France: $2,184
Korea: $2,184
United States:
$11,195
Italy: $1,989
Taiwan: $1,825
Rest of World:
$15,474
U.K.: $1,601
Spain: $1,283
Merchandise Exports and Imports
(1999)
Exports
Imports
Percentage of World Total
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
U.S.
Germany
Japan
France
U.K.
Italy
Canada
Country
Source: International Monetary Fund, International
Financial Statistics, Washington D. C., December 1999.
U.S. Direct Investments Abroad,
1998
Germany
4.4%
Bermuda
4.2%
France
4.0%
Netherlands
8.1%
Canada
10.6%
Host-Country
Shares
Japan
3.9%
United Kingdom
18.2%
Brazil
3.9%
Switzerland
3.9%
Australia
3.4%
Panama
2.7%
Other
32.8%
Source:Survey of Current Business, Bureau of
Economic Analysis, U.S. Department of Commerce,
Washington D.C. July and August 1999: pp. 50 and 52
Foreign Direct Investments in the U.S., 1998
Japan
16.3%
United Kingdom
18.6%
Parent-Country
Shares
Netherlands
11.9%
Other
17.8%
Germany
11.7%
Canada
9.2%
France
7.7%
Switzerland
6.7%
Source:Survey of Current
Business, Bureau of
Economic Analysis, U.S.
Department of Commerce,
Washington D.C. July and
August 1999: pp. 50 and 52
The Nationality of the World’s 100 Largest
The Nationality of the World’s 100 Largest
Industrial
origin)
IndustrialCorporations
Corporations(by
(by country
country of
of origin
)
1963 1979
1979 198419841990 1990
1963
1993 1993
1995 1995
1996
2-4
United States
United States
67
Germany Germany
Britain Britain
France France
Japan
Japan
Italy
Italy
Netherlands-United Kingdom
Netherlands-United Kingdom
Netherlands
Netherlands
Switzerland
ArgentinaSwitzerland
Belgium Argentina
Brazil
Belgium
Canada Brazil
India
Canada
Kuwait India
Mexico Kuwait
Venezuela
Mexico
South Korea
Venezuela
Sweden
South Korea
South Africa
Sweden
Spain
Turkey South Africa
Spain
China
13
7
4
3
2
2
1
1
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Turkey
Irwin/McGraw-Hill
67 47 47 47
13 13 13 8
7 7
7 5
4 11 11 5
3
2
2
1
1
-
7
3
2
3
1
-1
1
2
--1
1
-------
7
3
2
3
1
1
1
2
1
1
-
12
3
2
1
2
1
1
-3
1
1
1
1
4
1
1
----
4733
812
56
510
32
33
14
12
64
106
24
32
14
14
1
4
12
6
12
18
23
-
-
1
18
4
3
2
2
1
13
2-1 -11
- -3-1-1
1
1
1
2
1
2
4
1
12
1---
23
4
4
2
2
1
13
3---1
-1
--1
1
1
4
1
1
2
-2
2
1
1
2
--
37
3
4
2
22
31
--3
-----1
-------1
2
1
-4
-1
---2
--
1997
2000
24
24
3624
13
14
21
13
12
29
37
4
3
2
22
52
--3
----------11
4
---2
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1213
52
1113
22
29
3
4
-52
32
-- 5
1 -- -- -- -- 1
-- 1
-4
---- -- -- 2
-
-
SOURCES: Adapted from “The World’s 500 Largest Industrial Corporations,” Fortune, Aug. 4, 1997
The Dynamic Environment of
International Trade
III. Some History
- Pax Romana
- Pax Americana
- Pax Pacificana
IV.
The Price of Protectionism
1. Trade Barriers
- Tariff Barriers
- Non-tariff Barriers
The Price of Protectionism
Total Costs to
Consumers
(in $ millions)
Number of
Jobs Saved
$27,000
640,000
Carbon Steel
6,800
9,000
$ 750,000
Autos
5,800
55,000
$ 105,000
Dairy products
5,500
25,000
$ 220,000
Shipping
3,000
11,000
$ 270,000
Meat
1,800
11,000
$ 160,000
Industry
Textiles and
apparel
SOURCE: Michael McFadden, “Protectionism Can’t Protect Jobs,”
Fortune, May11, 1987, pp. 125.
Cost per
Job Saved
$
42,000
The Effects of Tariffs
Increase
Inflationary pressures.
Special interests’ privileges.
Government control and political considerations
in economic matters.
Weaken
Balance-of-payments positions.
Supply-and-demand patterns.
International understanding (they can start trade
wars).
Restrict
Manufacturer’ supply sources.
Choices available to consumers
Competition.
The Dynamic Environment of
International Trade
V.
Major Categories of Non-tariff Barriers
1. Specific Limitations on Trade
- Quotas
- Licensing
- Minimum Import Prices
2. Customs and Administrative Entry Procedures
- Antidumping Practices
- Tariff Classification
- Documentation
- Fees
The Dynamic Environment of
International Trade
3. Standards
- Include standard disparities; testing
methods, and packaging/labeling
4. Government Participation in Trade
- Procurement Policies
5. Charges on Imports
- Prior import deposits
- Administrative fees
The Dynamic Environment of
International Trade
6. “Voluntary” or Orderly Agreements
7. Other
- Service barriers
- Investment barriers
* Note that most common forms of non-tariff barriers
are subsidies and quotas.
The Dynamic Environment of
International Trade
VI. Transnational Institutions
1. International Monetary Fund
2. World Bank
3. World Trade Organization
( Formerly GATT )
4. Regional Institutions
What WTO Will Mean to
Different Industries
Gainers

Banks would be allowed to compete freely in South Korea
and other places where they are restricted.

Insurance companies would be able to sell policies in India,
one of the Worlds most tightly closed markets.

Movies would have better protection from Thai film
counterfeiters.

Pharmaceuticals would have better protection from
Argentine imitators.

Computer software makers would have better protection
from Brazilians who rip off copyrighted programs.
SOURCE: Adapted from “What free trade will mean to different Industries,”
Fortune, August 26, 1991, P.92
What WTO Will Mean to
Different Industries
Losers


Glassware tariffs as high as 30 percent on inexpensive
drinking glasses would be reduced, threatening some
40,000 jobs.
Textiles would gradually lose quotas and tariffs that protect
1.1 million U.S. workers - and add 50 percent to wholesale
prices of clothing.

Peanuts would lose quotas that limit imports to a handful
and that protect 19,000 American farmers.

Dairy imports of foreign cheese, now limited to 19,000 tons a
year, would go up, hurting 240,000 U.S. farmers.
Sugar import ceilings, now 25 percent of the nine million
tons the United States uses each year, would go, threatening
11,000 sugar beet and cane growers.

SOURCE: Adapted from “What free trade will mean to different Industries,”
Fortune, August 26, 1991, P.92.
Ties that Bind:
Japanese Keiretsu and Toyota
Toyota has a typical keiretsu family with financial ties to its
most important suppliers. Some of those companies, with
the percentage of each that Toyota owns:
Lighting
Rubber
Disc Brakes
Transmissions, clutches, brakes
Clocks
Electronics
Seat belts, switches
Steel
Upholstery material
Door sashes, molding
Painting
Mufflers
Koito Mfg.
Toyoda Gosel
Akebona
Aisin Seiki
Jeco
Nippondenso
Tokai Rika
Aichi Steel Works
Kyowa Leather
Shiroki
Trinity
Futaba Industrial
SOURCE: Adapted from “Japan: All in the Family,”
Newsweek, June 10, 1991, p 38.
19.0 %
41.4
13.9
22.0
34.0
23.6
28.2
21.0
33.5
13.2
30.2
13.2
Ford’s Keiretsu
VEHICLE ASSEMBLY
Company
Country
Mazda
Kia Motors
Aston Martin Lagonda
Autolatina
Iveco Ford Truck
Japan
Korea
Britain
Brazil-Argentina
Britain
Percent Equity
25%
10%
75%
49%
48%
PARTS PRODUCTION
Company
Country
Cummins
U.S.
Excel Industries
U.S.
Decoma International Canada
Component
Percent Equity
Engines
Windows
Body Parts, Wheels
SOURCE: Adapted from “Learning from Japan,”
Business Week, January 27, 1992, p. 55.
10%
40
49