6 - 1 Copyright McGraw-Hill/Irwin, 2005 International Linkages The United States and World Trade...

6 - 1Copyright McGraw-Hill/Irwin, 2005

International Linkages

The United States and World Trade

Rapid Trade Growth

Specialization & Comparative Advantage

The Foreign Exchange Market

Government & Trade

Key Terms

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The United States in the

Global Economy

6C H A P T E R




Rapid Trade Growth



Government & Trade

Key Terms

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INTERNATIONAL LINKAGES

Goods and Services

Capital and Labor

Information and Technology

Money

UNITEDSTATES

ECONOMY

OTHERNATIONAL

ECONOMIES

Trade Flows

Resource Flows




Rapid Trade Growth



Government & Trade

Key Terms

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VolumeDependenceTrade PatternsFinancial

Linkages

THE UNITED STATES & WORLD TRADE




Rapid Trade Growth



Government & Trade

Key Terms

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Exports - Percent of GDP, 2002

Netherlands 62%Canada 41%Germany 36%New Zealand 33%Spain 29%Italy 28%France 27%United Kingdom 26%Japan 12%United States 11%





Rapid Trade Growth



Government & Trade

Key Terms

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Principal U.S. Exports & Imports, 2002


Chemicals $49.8

Semiconductors 42.3

Consumer Durables 40.1

Computers 38.6

Generating Equipment 27.6

Aircraft 26.7

Telecommunications 22.2

Automobiles 20.5

Grains 14.4

Nonferrous Metals 12.2

Automobiles $114.1

Petroleum 103.6

Computers 75.3

Household Appliances 66.4

Clothing 64.3

Chemicals 33.1

Consumer Electronics 32.8

Semiconductors 26.0

Telecommunications 23.2

Iron and Steel 17.7

Exports Amount Imports Amount




Rapid Trade Growth



Government & Trade

Key Terms

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Exports to:

Imports from:

Value (Billions of Dollars)


Industrial Countries $381Developing Countries 302Total $683


U.S. Exports & Imports of Goods,2002





Rapid Trade Growth



Government & Trade

Key Terms

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Exports to:

Imports from:





U.S. Exports & Imports of Goods,2002


Imports Exceed Exports By

$484 BillionThat’s over 9,680,000 Jobs at $50,000 Each!

Imports Exceeded Exports by$346 Billion in 1999




Rapid Trade Growth



Government & Trade

Key Terms

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RAPID TRADE GROWTHFacilitating Factors...

• Transportation Technology• Communications Technology• General Decline in Tariffs• Participants

•United States, Japan, and Western Europe•Multinational Corporations

•New Participants•Collapse of Communism




Rapid Trade Growth



Government & Trade

Key Terms

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IN BILLIONS OF DOLLARS0 100 200 300 400 500 600 700

United StatesGermany

JapanFrance

United KingdomChina

CanadaItaly

NetherlandsBelgium-Lux.

MexicoSouth Korea

TaiwanSingapore

Spain

GLOBAL PERSPECTIVECOMPARATIVE EXPORTS, 2001

Source: World Trade Organization




Rapid Trade Growth



Government & Trade

Key Terms

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• Basic Principle• Comparative Costs• Comparative Advantage• Terms of Trade• Gains from Specialization

& Trade

SPECIALIZATION ANDCOMPARATIVE ADVANTAGE




Rapid Trade Growth



Government & Trade

Key Terms

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$1 will buyEXCHANGE

RATES:.63 British pounds

10.91 Mexican pesos

.93 European euros

119 Japanese yen

1237 South Korean won

47.68 Indian rupee

1.48 Canadian dollars

1.36 Swiss francs

8.54 Swedish krona

GLOBAL PERSPECTIVEForeign Currency per U.S. Dollar




Rapid Trade Growth



Government & Trade

Key Terms

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• A Competitive Market• Linkages to All Domestic and Foreign Prices

• Dollar-Yen Market• Changing Rates:

• Depreciation & Appreciation

THE FOREIGN EXCHANGE MARKET




Rapid Trade Growth



Government & Trade

Key Terms

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The Market for Yen

Quantity of Yen

Dol

lar

Pri

ce o

f 1

Yen

0

.01

P

QQe

Sy

Dy

ExchangeRate: $.01 = ¥1





Rapid Trade Growth



Government & Trade

Key Terms

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Equals

Equals

Equals

Equals

Dollar priceof foreigncurrency

rises

Internationalvalue of dollar

falls (dollardepreciates)

Foreigncurrencyprice of

dollar falls

Internationalvalue of foreigncurrency rises

(foreign currencyappreciates)

Currency Appreciation and Depreciation





Rapid Trade Growth



Government & Trade

Key Terms

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Trade Impediments & Subsidies

•Protective Tariffs

•Import Quotas

•Nontariff Barriers

•Export Subsidies

GOVERNMENT & TRADE




Rapid Trade Growth



Government & Trade

Key Terms

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GOVERNMENT & TRADEWhy Government Trade Interventions?

•Misunderstanding of the Gains From Trade

•Political Considerations•Costs To Society•Multilateral Trade Agreements

•Free-trade Zones•Smoot-Hawley Tariff Act




Rapid Trade Growth



Government & Trade

Key Terms

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GOVERNMENT & TRADEWhy Government Trade Interventions?• Reciprocal Trade Agreements Act,

1934•Negotiating Authority•Generalized Reductions•Most-Favored-Nation Clauses

• General Agreement on Tariffs and Trade (GATT)

•Uruguay Round• World Trade Organization (WTO)




Rapid Trade Growth



Government & Trade

Key Terms

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GOVERNMENT & TRADEWhy Government Trade Interventions?

•The Doha Round (Qatar)•The European Union (EU)

•The EU Trade Bloc•The Euro

•North American Free Trade Agreement (NAFTA)

•Increased Global Competition

multinational corporations

comparative advantage

terms of trade

foreign exchange market

exchange rates

depreciation

appreciation

protective tariffs

import quotas

nontariff barriers

export subsidies

Smoot-Hawley Tariff Act

Reciprocal Trade Agreements Act

most-favored-nation clauses

General Agreement on Tariffs & Trade (GATT)

World Trade Organization (WTO)

Doha Round

European Union (EU)

trade bloc

euro

North American Free Trade Agreement (NAFTA)

Copyright McGraw-Hill/Irwin, 2005BACK END




Rapid Trade Growth



Government & Trade

Key Terms

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Measuring Domestic Outputand National Income

Coming up next...

Chapter 7

6 - 1 Copyright McGraw-Hill/Irwin, 2005 International Linkages The United States and World Trade...

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