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1、TRADE IN THE GLOBAL ECONOMY1 International Trade2Migration and Foreign Direct 3Conclusion12 of 72Chapter OutlineInternational TradewThe Basics of World TradeMap of World TradeTrade Compared to GDPBarriers to TradeMigration and Foreign Direct InvestmentMap of MigrationMap of Foreign Direct Investment
2、Conclusion复旦国际贸易英文013 of 72Introduction“Globalization” has four major aspects:wFlow of goods and services across borderswMovement of people and firmswTight integration of financial marketswSpread of culture and ideas between countriesNeed to know historywInternational trade and the integration of fi
3、nancial markets were strong even before World War I.wMany factors over time have disrupted these flows, positively and negatively.复旦国际贸易英文014 of 72IntroductionMigration across countries is not as free as the flow of goods and services due to different restrictions.Foreign Direct Investment is mostly
4、 unrestricted in industrial countries, but not necessarily in developing countries.Investments in both developing and industrial countries are a way for firms to spread their business and knowledge across borders.复旦国际贸易英文015 of 72Trade in the Global EconomyThe Basics of World TradeImports are the pu
5、rchase of goods or services from another country.Exports are the sale of goods or services to other countries.wGermany had the largest exports of goods in 2006 with China and the U.S. coming in second and third.What country was the worlds largest exporter of goods in 2009?复旦国际贸易英文016 of 72Trade in t
6、he Global EconomyChina!In 2009, China overtook Germany as the top exporter, selling some $1.3 trillion in goods to other countries, slightly ahead of the $1.17 trillion exported by Germany. The third largest exporter of goods was U.S., which exported $1.05 trillion in goods in 2009.Merchandise goods
7、: includes manufacturing, mining, and agricultural products.复旦国际贸易英文017 of 72Trade in the Global EconomyService exports: includes business services like eBay, travel, insurance, and transportation.wIn combining all goods and services, the U.S. is the worlds largest exporter followed by Germany, Chin
8、a, Japan, UK and France.Migration is the flow of people across borders as they move from one country to another.Foreign Direct Investment is the flow of capital across borders when a firm owns a company in another country.复旦国际贸易英文018 of 72Trade in a Global EconomyWhy do countries trade?wThey can get
9、 products from abroad cheaper or of higher-quality than those obtained domestically.The fact that Germany was the largest exporter of goods in 2005 shows its technology for producing high-quality manufactured goods. (BMW, Benz, Audi, Siemens) China produces goods more cheaply than most industrialize
10、d countries.The United States has both the technology to produce high-quality manufactured goods and the ability to produce agricultural goods very cheaply because of its abundant land resources as well as powerful and effective government policies.We will develop models to explain the direction of
11、trade flows and how different groups are affected.wConsider the role for and results of government intervention.复旦国际贸易英文019 of 72The Basics of World TradeThe Trade Balance of a country is the difference between the total value of exports and the total value of imports.wUsually includes both goods an
12、d serviceswIt is also called net export (NX)wNX=X-MA Trade Surplus exists when a country exports more than it imports.A Trade Deficit exists when a country imports more than it exports.复旦国际贸易英文0110 of 72The Basics of World TradeBilateral Trade Balance is the difference between exports and imports be
13、tween two countries.wThe U.S. trade deficit with China was over $200 billion in 2005 and 2006.What are the problems with bilateral trade data?wIf some of the inputs are imported into the country, then the value-added is less than the value of exports.wBarbie is made with oil from Saudi Arabia, plast
14、ic from Taiwan, hair from Japan, and is assembled in China.wDoll is valued at $2 when it leaves China but only 35 cents is value-added from Chinese labor.复旦国际贸易英文0111 of 72Barbie in World TradeFigure 1.1 Barbie Doll复旦国际贸易英文0112 of 72The Basics of World TradeWhat are the problems with bilateral trade
15、 data?wThe whole $2 is counted as an export from China to the U.S. even though only 35 cents of it really comes from China through their labor contribution.wThis shows the bilateral trade deficit or surplus is not as clear as you might think.This is a short-coming of the official statistics.复旦国际贸易英文
16、0113 of 72An iPod Has Global Value. Ask the (Many) Countries That Make It.Who makes the Apple iPod?Apple outsources the entire manufacture of the device to a number of Asian enterprisesThe iPod, like many other products, is made in several countries by dozens of companies, with each stage of product
17、ion contributing a different amount to the final valueThe real value of the iPod doesnt lie in its parts or even in putting those parts together. The bulk of the iPods value is in the conception and design of the iPod复旦国际贸易英文0114 of 72The iPod is valued at about $150 when it leaves the dock in China
18、 en route to the United States. It doesnt really make sense to count the entire $150 iPod as a Chinese export to the United States, as is done in official trade statistics, when only $4 is the value-added in China.The difference between the value of the iPod when it leaves China and the cost of part
19、s and materials purchased in China and imported from other countries.复旦国际贸易英文0115 of 72The Basics of World TradeSo why is this a big deal?wIn 1995, toys imported from China totaled $5.4 billion.wAs trade with China continues to grow, Chinas apparent trade advantage begins to worry many in the U.S.wW
20、hen the trade statistics are misleading, it can cause undue controversy.复旦国际贸易英文0116 of 72What to do?WTO and the United States ITC suggested that a new statistics method based the value-added should be used in the international trades statistics to replace the traditional method based on the total v
21、alue.WTO had started to promote the new method all over the world.But the tradition is changed very difficultly.复旦国际贸易英文0117 of 72APPLICATIONIs Trade Today Different from the Past?FIGURE 1-1 (a)The Changing Face of U.S. Import Industries, 19252009 The types of goods imported by the United States has
22、 changed drastically over the past 84 years. 复旦国际贸易英文0118 of 72Foods,feeds,andbeveragesandindustrialsupplieswere90%ofimportsin1925,butwereonly35%in2009.Capitalplusconsumergoodsplusautomobileshaveincreasedfrom10%ofimportsin1925to65%ofimportsin2009.复旦国际贸易英文0119 of 72Is Trade Today Different from the P
23、ast?FIGURE 1-1 (b)The Changing Face of U.S. Export Industries, 19252009 The types of exported by the United States has also changed drastically over the past 84 years. APPLICATION复旦国际贸易英文0120 of 72Theexportsharesoffoods,feeds,andbeveragesandindustrialsupplieshavefallenfrom80%in1925to40%in2009.Export
24、sofcapitalplusconsumergoodsplusautomobileshaveincreasedfrom20%in1925tomorethan60%in2009.复旦国际贸易英文0121 of 72Map of World TradeFigure 1.2 World Trade in Goods, 2000 ($ billions)Note: the amount of trade in goods is illustrated by the width of the lines, with the largest trade flows having the heaviest
25、lines and the smallest having dashed lines.复旦国际贸易英文0122 of 72Map of World TradeEuropean and U.S. TradewTrade within Europe is the largest, about 28% of world trade.European Union (EU) countries have eliminated internal trade barriers.EU has 25 members with two more joining in 2007.European and U.S.
26、TradewEurope and the U.S. together account for 35% of world trade flows.wDifferences among these countries explain some of the trade between them.wDespite this, industrialized countries like the U.K. and U.S. have many similarities.wKey distinction between “old” and “new” trade theoryFormer explains
27、 trade between countries with big differencesLatter explains trade between similar countries复旦国际贸易英文0123 of 72Map of World TradeTrade in the AmericaswTrade between North, Central, and South America and the Caribbean totals 13% of all world trade.wMost of this is within the North American Free Trade
28、Area which consists of Canada, the U.S. and Mexico.wUnlike the EU, it is unlikely that NAFTA will gain new countries any time soon.Trade between the NAFTA countries and Central and South America is relatively small and the distances are large. 复旦国际贸易英文0124 of 72Map of World TradeTrade with AsiawAll
29、exports from Asia total 28% of all world trade.Exports from China alone doubled from 2000 to 2005.wMany reasons why Asia trades so muchChinas labor is cheap.Japan can produce high quality goods efficiently.Other RegionswOil and natural gas are exported from the Middle East and Russia.Exports from th
30、ese two areas totaled another 10% of world trade.wAfrica accounts for only 2.5% of world trade.Very small given its size and populationMany believe getting Africa out of poverty will require better linkages with the world through trade.复旦国际贸易英文0125 of 72Map of World Trade in 2006FIGURE 1-2World Trad
31、e in Goods, 2006 ($ billions) Trade in merchandise goods between selected countries and regions of the world. 复旦国际贸易英文0126 of 72Map of World TradeShares of World Trade, Accounted for by Selected Regions, 2000Shares of World Trade, Accounted for by Selected Regions, 2006复旦国际贸易英文0127 of 72Trade Compar
32、ed to GDPSo far, we have discussed the value of trade crossing international borders. But there is a second way that trade is often reported, and that is as a ratio of trade to a countrys gross domestic product (GDP), the value of all final goods produced in a year. 复旦国际贸易英文0128 of 72Trade Compared
33、to GDPAnother way to measure trade is by looking at its ratio to GDP.For the United States, the average value of imports and exports (for goods and services) expressed relative to GDP was 15% in 2008. (13% in 2005)Most other countries have a higher ratio. (why?)Countries that are important shipping
34、and processing centers are much higher.wHong Kong, Malaysia, and Singapore复旦国际贸易英文0129 of 72Trade Compared to GDPAs we saw with the Barbie example, the value-added can be much less than the total value of exports.wThis is why trade can be greater than GDP.The countries with the lowest ratio are thos
35、e with large economic values or those that have just started trading.Although the U.S. was the worlds largest trader in 2005, it had the smallest ratio to GDP.复旦国际贸易英文0130 of 72Trade Compared to GDPTable 1.2 Trade/GDP Ratio in 2005复旦国际贸易英文0131 of 72Trade Compared to GDPTrade/GDP Ratio in 2008Note: C
36、ountries with the highest ratios of trade to GDP tend to be small in economic size. Countries with the lowest ratios of trade to GDP tend to be very large in economic size. China is an exception. ( Processing trade)复旦国际贸易英文0132 of 72Barriers to TradeIn Table 1.2 we saw the differences in the amount
37、of trade.Why does this occur?wImport tariffsthe taxes that countries charge on imported goodswTransportation costs of shipping between countrieswOther events such as wars, etc.复旦国际贸易英文0133 of 72Barriers to TradeTrade barriers refer to all factors that influence the amount of goods and services shipp
38、ed across international borders.Barriers to trade change over time as policies, technology, etc. change.The First “Golden Age” of Tradew18901913: The period from 1890 until World War I (19141918) is sometimes referred to as a “golden age” of international trade. wSignificant improvements in transpor
39、tationThose years saw dramatic improvements in transportation, such as the steamship and the railroad, that allowed for a great increase in the amount of international tradewU.K. had highest ratio of trade to GDP at 30%复旦国际贸易英文0134 of 72Barriers to TradeInter-War Periodw19131920 showed decreases in
40、trade for Europe and Australia due to WWI and aftermath.wAfter 1920 the ratio fell in all other countries and was made worse by the Great Depression wU.S. adopted high tariffsSmoot-Hawley tariffsin June 1930, some as high as 60%.other countries retaliatedthe average world-wide tariff rate rose to 25
41、% by 1933.wCanada retaliated by applying high tariffs of its own against the United States; France used import quotas.wImport quotaslimitations on the quantity of an imported good.复旦国际贸易英文0135 of 72Barriers to TradeInter-War PeriodwHigh tariffs and restrictions lead to a dramatic fall in world trade
42、 with large costs to the U.S. and the world economy.wThis decline in the world economy lead the Allied countries to meet after WWII to develop policies to keep tariffs low.General Agreement on Tariffs and Trade (GATT) which became the World Trade Organization (WTO)wConclusionhigh tariffs reduce the
43、amount of trade and impose large costs on countries involved.复旦国际贸易英文0136 of 72Barriers to TradeSecond “Golden Age” of TradewAfter WWII, some countries were able to increase trade back to WWI levels quickly.wThe end of WWII, the reduction of tariffs from GATT, and improved transportation contributed
44、 to the increase in trade.Shipping container was invented in 1956, allowed goods to be moved by ship, rail, and truck more cheaply than before.wWorld trade grew steadily after 1950 with many countries exceeding their pre-WWI trade peak.复旦国际贸易英文0137 of 72Barriers to TradeFigure 1.3 Trade in Goods and
45、 Services Relative to GDP复旦国际贸易英文0138 of 72Barriers to TradeFigure 1.4 Average Worldwide Tariffs, 18602000复旦国际贸易英文0139 of 72Barriers to TradeFigure 1.4 Average Worldwide Tariffs, 18602000The Financial CrisisFIGURE 1-5Change in the Value of Trade, 20072009 (percent) As a result of a worldwide financi
46、al crisis and economic recession, the value of trade plummeted between early 2008 and early 2009.复旦国际贸易英文01HEADLINES40 of 72A Sea Change in Shipping 50 Years AgoIn 1956 an entrepreneur from North Carolina, Malcom McLean, loaded a ship with 58 35-foot containers and sailed from Newark, NJ to Houston,
47、 TX.He was the first to design a transportation system around the packaging of cargo in huge metal boxes that could be loaded and unloaded by cranes.复旦国际贸易英文01HEADLINES41 of 72A Sea Change in Shipping 50 Years AgoContainer shipping ended up replacing the traditional “break-bulk” cargo-handling metho
48、d where cargo was stowed loosely in the ships hold.This invention dramatically reduced shipping costs making it much easier and cost effective to ship world-wide.It allowed trade to increase significantly.复旦国际贸易英文0142 of 72Map of MigrationNow that we have introduced international trade, we need to i
49、ntroduce migration and FDI.Figure 1.5 shows a map of the number of migrants around the world.Values shown are number of persons in 2000 who were living (legally or illegally) in a country different from where they were born.The bolder the line, the more migrants复旦国际贸易英文0143 of 72Map of MigrationFigu
50、re 1.5 Foreign-Born Migrants, 2000 (millions)复旦国际贸易英文0144 of 72Map of MigrationFIGURE 1-6Foreign-Born Migrants, 2005 (millions) This figure shows the number of foreign-born migrants living in selected countries and regions of the world for 2005 in millions of people. 复旦国际贸易英文0145 of 72Map of Migrati
51、onUnlike trade, the majority of migration occurs outside the OECD between countries that are less wealthy.Many immigrants come from same continent but move countries for employment or other reasons.Given a choice, migrants would like to move to a higher-wage country.Unlike trade, there are much more
52、 significant regulations on migration.wFlow of people between countries is much less free than the flow of goods.复旦国际贸易英文0146 of 72Map of MigrationPolicy makers fear that immigrants from low-wage countries will drive down wages for a countrys own lower-skilled workers.However, international trade ca
53、n act as a substitute for movements of capital and labor across borders.wTrade can raise the living standard of workers in the same way that moving to a higher-wage country can.wAs trade has increased worldwide, more workers are able to work in export industries.This allows them to benefit from trad
54、e without moving to another country.复旦国际贸易英文0147 of 72Map of MigrationEuropean ImmigrationwWealthier countries typically have greater immigration restrictions.wThe EU, up to 2004, had an open migration policy between member countries.wIn 2004, ten more countries joined; these countries had incomes s
55、ignificantly less than the existing members.Fears of labor inflow led to significant policy disagreements.wAs less wealthy countries have been joining the EU, the wealthier countries are having many more issues with free migration.复旦国际贸易英文01HEADLINES48 of 72Balkans Need Not ApplyBritain was one of t
56、hree EU countries that opened its jobs to all nationals from the 10 states that joined in 2004.Given that policy, Britain stated that it will not fully open its labor market to Romanians and Bulgarians who joined in January of 2007.Bulgaria threatened “reciprocal measures” given their belief the dec
57、ision is unfair.复旦国际贸易英文0149 of 72Map of MigrationU.S. Immigration wIn 2005 it was estimated that 12 million Mexicans were living in the U.S.This is more than 10 percent of Mexicos population.wThe concern of wages being driven down is amplified by the exceptionally high number of illegal immigrants.
58、wPolicy makers in the U.S. seem to all believe that the current immigration system is not working.复旦国际贸易英文01HEADLINES50 of 72Low-Wage Workers from Mexico Dominate Latest Great Wave of ImmigrantsSince the 1990s the U.S. has seen the greatest wave of immigration in its history.Of 300 million people in
59、 the U.S., about 37 million were born in another country.The current wave has been greatly dominated by immigrants from Mexico: one-third of those foreign born are from Mexico.复旦国际贸易英文01HEADLINES51 of 72Low-Wage Workers from Mexico Dominate Latest Great Wave of ImmigrantsThere have been many proposa
60、ls from both political parties to “fix” a supposedly dysfunctional system.The largest sign of dysfunction is that illegal immigrants outnumber legal ones and about 56 percent of those come from Mexico.The system was set up to favor family connections, not labor market demands.复旦国际贸易英文01HEADLINES52 o
61、f 72Low-Wage Workers from Mexico Dominate Latest Great Wave of ImmigrantsA legal immigrant could petition for a family member to be brought over, but visa categories have numerical caps.The backlog of applications has become so large the system cant function.An American citizen wanting to bring a si
62、bling from Mexico has a wait time of 13 years.复旦国际贸易英文0153 of 72Map of Foreign Direct InvestmentFDI occurs when a firm in one country owns a company in another country.direct Investment- the investment for the purpose of active controlling the target firm.indirect investment (international security
63、investment)- the investment for the purpose of obtaining the financial return through outright purchase of shares.In theory, the two definitions are so clear that we can distinguish direct investment from indirect investment easily once we know the purpose of any investment.复旦国际贸易英文0154 of 72Map of
64、Foreign Direct InvestmentBut in practice or statistics, we cant inquire the purpose of each investor on his each investment activity in order to classify investment.So it is reasonable difficult to classify investment in practice if the precise criterion is absent.It leads confusion in statistics.Fo
65、r example, if the company buy the 11% shares of another company, it is a direct investment or an indirect investment? The answer in theory depends on the purpose of the investor.复旦国际贸易英文0155 of 72Map of Foreign Direct InvestmentIn practice, the answer is uncertain. To a company with the concentratio
66、n of the stock equity, the stockholder that owns 11% shares has no influences on the firms operation.To a company with the de-concentration of the stock equity, the stockholder that owns 11% shares is maybe the biggest shareholder so that he has great power on the firm operation.So many countries ,
67、such as the United States, Canada, view 10% as the criterion to divide investments into direct one and indirect one in practice and official statistics. 复旦国际贸易英文0156 of 72Map of Foreign Direct InvestmentIf the company buy the 11% shares of another company, it is a direct investment or an indirect in
68、vestment? The answer in practice is direct investment in spite of the purpose of the investor.复旦国际贸易英文0157 of 72Map of Foreign Direct InvestmentTwo ways FDI can occurHorizontal FDI occurs when a firm from one country owns a company in another industrial country.Purchase of Rockefeller Center in New
69、York by Japanese investorThe 2009 purchase of Chrysler by Fiat, an Italian firm.Reasons for Horizontal FDIwFirst, allows the firm to avoid any tariffs or quotas from exporting to a foreign market since it produces locally. For example, as early as the 1950s and 1960s, American auto manufacturers pro
70、duced and sold cars in Europe to avoid having to pay any tariffs. In 1980s and 1990s, many Japanese auto firms opened plants in U.S. to avoid U.S. import quotas on cars.复旦国际贸易英文0158 of 72Map of Foreign Direct InvestmentReasons for Horizontal FDIwSecond, provides improved access to that economy becau
71、se the local firms will have better facilities and information for marketing products. Toyota Motor Sales U.S.A. is a wholly owned subsidiary of Toyota Motor Corporation in Japan and markets Toyota cars and trucks in the United States.wThird, an alliance between the production divisions of firms all
72、ows technical expertise to be shared and avoids possible duplication of products. the American and Canadian divisions of GM and Ford, which have operated plants specializing in different vehicles on both sides of the borders for decades. 复旦国际贸易英文0159 of 72Map of Foreign Direct InvestmentVertical FDI
73、 occurs when a firm from an industrial country owns a plant in a developing country.wThis usually occurs to take advantage of lower wages in the developing country.wThis is a reasonable view of FDI in China.wAccording to the UNCTADs World Investment Report 2010, Chinas foreign direct investment (FDI
74、) inflows rank second in the world in 2010 and first among developing countries for 18 years in a row. The reasons of Chinas attracting foreign investment are mainly for low wages and huge consumption market.wAdditionally, firms have moved to China to avoid tariffs and acquire local partners to sell
75、 there.复旦国际贸易英文0160 of 72Map of Foreign Direct InvestmentFigure 1.6 Flows of Foreign Direct Investment, 2000Note: The thicker lines indicate higher levels of FDI.复旦国际贸易英文0161 of 72Map of Foreign Direct InvestmentFigure 1.6 shows the principal flows of FDI in 2000. In 2000 there were FDI flows of $1.
76、3 trillion into or out of OEDC countries.This value is more than 90% of total world FDI.复旦国际贸易英文0162 of 72Map of Foreign Direct InvestmentEuropean and U.S. FDIwThe largest flows of FDI are in Europe, amounting to about $450 billion in 2000.Merger of Daimler-BenzwFlows within Europe and between Europ
77、e and the U.S. add up to 55% of the world total. wThe greatest amount of FDI is between industrialized countries; thus, the greatest amount is horizontal FDI.复旦国际贸易英文0163 of 72Map of Foreign Direct InvestmentFDI in the AmericaswBrazil and Mexico are two of the largest recipients of FDI among develop
78、ing countries after China.wInflows to Brazil and Mexico accounted for about one-half of the total FDI inflows to Latin America.wThese are examples of Vertical FDI caused by the opportunity for lower production wages.复旦国际贸易英文0164 of 72Map of Foreign Direct InvestmentFDI with AsiawFDI between the U.S.
79、 and Japan and between Europe and Japan is horizontal.wThe rest of Asia shows fairly large flows of FDI and these flows are examples of vertical FDI to take advantage of low wages.wChina is the largest recipient country for FDI in Asia, the third largest recipient of FDI in the world in 2000.(the fo
80、urth in 2006 and the second in 2010)复旦国际贸易英文0165 of 72Map of Foreign Direct InvestmentFDI with AsiawThe FDI stock in China and Hong Kong was $742 billion in 2006, which account for 35% of the total FDI into China and the rest of Asia($2.1 trillion)wThere is some “double counting” between China and H
81、ong Kong.This happens because Hong Kong has direct investment in mainland China and that is funded, in part, by businesses on the mainland.复旦国际贸易英文0166 of 72Map of Foreign Direct InvestmentFDI with AsiawThe flow of funds from China to Hong Kong and then back to China is called “round tripping”.One-q
82、uarter to one-half of FDI flowing into China is funded that way.why?复旦国际贸易英文0167 of 72Map of Foreign Direct InvestmentFIGURE 1-7Stock of Foreign Direct Investment, 2006 ($ billions) This figure shows the stock of foreign direct investment between selected countries and regions of the world for 2006
83、in billions of dollars. 复旦国际贸易英文0168 of 72European and U.S. FDI The largest stocks of FDI arewithin Europe; these stocks amounted to $5.6 trillion in 2006, or nearly one-half of the world total.FDI in the Americas Brazil and Mexico are two of the largest recipients of FDI among developing countries,
84、 after China.FDI with Asia China has become the largest recipient country for FDI in Asia and the fourth largest recipient of FDI in the world.复旦国际贸易英文0169 of 72Map of Foreign Direct InvestmentwA notable thing is the reverse-vertical FDI.wReverse-vertical FDI refers to companies from developing coun
85、tries buying firms in industrial countries.wWhy the reverse-vertical FDI happened?wThey are acquiring the technological knowledge of those firms to combine with low wages in home country.复旦国际贸易英文01HEADLINES70 of 72Chinese Buyer of PC Unit is Moving to IBMs HometownLenovo purchased IBMs personal comp
86、uter business as part of the process of becoming a multinational corporation.It will move its headquarters to NY where IBM is based and hand over management to a group of senior IBM executives.They know they dont have the necessary global experience to run the new company and are investing in IBMs e
87、xperience.复旦国际贸易英文01HEADLINES71 of 72Geelys Big DealThe recent example of reverse-vertical FDI is the 2009 purchase of Volvo (formerly a Sweden company) from Ford Motor Company, by the Chinese automaker Geely.The purpose of Geelys buying Volvo is not only to learn the best technology but also to acquire the high-end brand “Volvo”, which help it get rid of the image of inferior-auto maker.The similar case is the purchase of Land Rover and Juguar from a British firm by the Indian Tata Motor.复旦国际贸易英文01
