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Assessment essay ppt模板-指导International Trade essay
International Trade
2009/10 LEVEL 3
Assessment: One essay of 1,800 words
Submission Date: Until 3 p.m. Wednesday, 14th August 2010
(Undergraduate office, Pemberton Building)
Failure to submit TWO copies of your work by this deadline will result in a mark of 0%指导assignment
The assignment must also be submitted in electronic format to the ‘Turnitin’ drop-box in the Blackboard site for this module and the Turnitin reference code added to the hand-in sheet
You are advised to plan your work carefully and back-up your work. Computing and printing problems will NOT be accepted as reasons for non-submission
For your information when preparing your coursework essay, refer to the following:
o University Regulation on the Presentation of Work for Formal Assessment (o University Statement on Academic Integrity (o Student Handbook on Plagiarism - remember to fully reference your work in the Harvard format.
Question-
Select a particular country (I select China) and utilise a range of data sources and literature to present an overview of the trade performance of the country with reference to the structure of protection.
Note: You are expected to present your answer as an essay while referring to a range of statistics, some of which you may have calculated.
International Trade
Classical Trade Theory and Comparative AdvantageReferences
TextbooksAppleyard, D., Field, A. and Cobb, S. (2005) International Economics, McGraw-Hill Ch. 3Husted, S. and Melvin, M. (2007), International Economics, Addison-Wesley Ch. 3Krugman, P. and Obstfeld, M. (2009) International Economics: Theory and Policy Addison-Wesley Ch. 2 & 3ArticlesBalassa, B. (1963) "An Empirical Demonstration of Classical Comparative Cost Theory“, The Review of Economics and Statistics, 45(3), pp. 231-38.Helpman, E. (1999), “The Structure of Foreign Trade”, Journal of Economic Perspectives, 13(2), pp.121-144.Krugman, P. (1997), “Ricardo’s difficult idea”, http://web.mit.edu/krugman/www/ricardo.htm
Importance of International Trade
World GDP is over 7 times what it was in 1950 but volume of world exports is now over 27 times what is was in 19501 MASSIVE INCREASE IN WORLD TRADEBut why? Reduction in trade barriers is certainly an important factor#p#分页标题#e#
EU trade
In 2007 the EU was the top exporter and importer of both goods and services in the world (International Trade Statistics, WTO)So who does the EU trade with?
EU(27) exports by destination in 2007
What do we trade?
In 2007 83% of the EU exports were manufactures and 61% of imports were manufactures (International Trade Statistics, WTO) World trade is similarly dominated by manufactures (Krugman and Obstfeld, 2009)Developing countries are also increasingly export manufactures and less agricultural products (Krugman and Obstfeld, 2009)
It is very important to understand patterns of trade, the terms of trade as well as the gains from trade. This will then allow us to assess the impact of various trade policies.
Rationale for International Trade
Self sufficiency means no specialisation therefore low productivityExchange allows specialisation in what we are good at producingThis applies to both internal and external tradeOpportunity cost of self sufficiency is the loss of foregone output in high efficiency areasSpecialisation with trade allows overall production to increase
Absolute Advantage
If Britain can produce cloth more efficiently than America and…America can produce food more efficiently than Britain….Both countries can gain from trade if they specialise in what they do best On this basis Adam Smith advocated free trade (allows division of labour)
Absolute Advantage
Britain will export cloth and America will export food
If Britain exchanges 30 units of cloth for 60 units of food…..Both countries could have 30 units of cloth and 60 units of foodBritain gains 15 units of food and America gains 15 units of cloth
But what if America is more efficient than Britain at producing both food and cloth?
David Ricardo was an English political economist in the early 1800s who introduced the concept of comparative advantage. Ricardo demonstrated that trade can be beneficial with only comparative advantageA country will export a good in which their productivity is relatively high.
Assumptions of the Ricardian Model
One factor of production – labourTwo goodsTwo countriesLabour is immobile internationally but mobile nationally (=> wages are equalised nationally but not internationally)Zero transport costsFree trade
Comparative Advantage
America’s superiority in cloth is 40/30 = 33% whereas superiority in food is 80/45 = 78% => America will still export food Notice if the ratios were the same there would be no basis for tradeHence Britain has a comparative advantage in cloth production => Britain will still export clothThere are also still gains from trade since a country’s consumption possibilities are greater
But do both countries always gain from trade?
It depends on:what your production would have been with no trade taking placethe units labour requirements for each of the goods.#p#分页标题#e#
What is the impact on trade on prices (terms of trade)?
Pre-trade relative prices are equal to relative unit labour requirementsIf both countries completely specialise their production the traded price of each good ends up somewhere between the two countries pre-trade prices.As long as prices rise when countries begin trading then there are gains from trade, since the real wage rises and everybody in a country gets the same wage.
The Ricardian model is simple but nevertheless very useful in explaining trade flows.This model allows us to reject a whole series of common claims…
‘A country will only benefit from free trade if strong enough to stand up to foreign competition’
But there are some serious limitations of the Ricardian model…
Assumes a high degree of specialisationAssumes constant return to scaleDoes not discuss the effects of trade on income distribution within countriesDoes not take into account the different resources held by different countries
Supportive Empirical Evidence
Summary
We have examined the simple Ricardian model that shows countries export goods in which their productivity is relatively high, in other words in which they have a comparative advantage.This model implies gains from tradeThere are gains no matter whether the trade is ‘competitive’ or ‘fair’Studies such as that by Balassa (1963) have confirmed the predictions of the Ricardian model empirically.
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