Bài giảng Macro - Chapter 17 The Gains From International Trade

Chapter 17The Gains FromInternational TradeSLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGEIn this chapter you will learnThe facts about Canada’s international tradeAbout specialization and comparative advantageAbout supply and demand analysis of exports and importsAbout trade barriers and their negative effects on nations’ economic well-beingChapter 17 TopicsSome Key Facts of International TradeThe Economic Basis for TradeSpecialization & Comparative AdvantageSupply & Demand Analysis of Exports & ImportsTrade BarriersThe Case for Protection: A Critical ReviewThe World Trade OrganizationSome Key FactsExports are 40% of Canadian GDPCanadian exports & imports have almost doubled as a % of GDP since 1971In 2000, Canada had a $48.4 billion trade surplusSome Key FactsPrincipal exports:automotive productsmachinery & equipmentforestry productsMain imports:machinery & equipmentautomotive productsCanada imports some of the same categories of goods it exportsSome Key FactsMost trade is with other advanced nations, particularly the USImproved transportation & communications, declines in tariffs, & peace have helped expand tradeWorld trade is dominated by North America, Japan, & Western EuropeGLOBAL PERSPECTIVE 17.1Some Key FactsSoutheast Asian economies have expanded their share of world tradeRussia, the Eastern European nations, & mainland China have also increased tradeSome Key FactsInternational trade links world economiesInternational trade & finance is often at the centre of economic policyChapter 17 TopicsSome Key Facts of International TradeThe Economic Basis for TradeSpecialization & Comparative AdvantageSupply & Demand Analysis of Exports & ImportsTrade BarriersThe Case for Protection: A Critical ReviewThe World Trade OrganizationThe Economic Basis for TradeWhy do nations trade?The distribution of resources is unevenEfficient production requires different technologies or resource combinationsProducts are differentiated as to quality & other non-price attributesThe Economic Basis for Tradelabour-intensive goodsThe Economic Basis for Tradelabour-intensive goodsland-intensive goodsThe Economic Basis for Tradelabour-intensive goodsland-intensive goodscapital-intensive goodsThe Economic Basis for TradeDistribution of resources may change over timeChapter 17 TopicsSome Key Facts of International TradeThe Economic Basis for TradeSpecialization & Comparative AdvantageSupply & Demand Analysis of Exports & ImportsTrade BarriersThe Case for Protection: A Critical ReviewThe World Trade OrganizationSpecialization & Comparative AdvantageThe Basic Principlespecialization according to comparative advantage reduces costsSpecialization & Comparative AdvantageTwo isolated nations1. constant costsstraight-line production possibilities curves2. differing costsdifferent technology & resourcesProduction PossibilitiesSoybeans (tonnes)Soybeans (tonnes)Steel (tonnes)Steel (tonnes)454035302520151210 5 030252015 10 4 05 10 15 18 20 25 305 8 10 15 20CanadaBrazil© 2002 McGraw-Hill Ryerson Ltd.19Macroeconomics, Chapter 17Figure 17-1the choice under self-sufficiencySpecialization & Comparative AdvantageProduction Possibilities: Self-SufficiencySoybeans (tonnes)Soybeans (tonnes)454035302520151210 5 030252015 10 4 05 10 15 18 20 25 305 8 10 15 20AB18 steel12 soybeans8 steel4 soybeansSteel (tonnes)Steel (tonnes)CanadaBrazil© 2002 McGraw-Hill Ryerson Ltd.21Macroeconomics, Chapter 17Figure 17-1Principle of Comparative AdvantageOpportunity Cost TableCountry 1 Steel Cost 1 Soybean CostCanada 1 soybean 1 steelBrazil 2 soybeans .5 steel Who has the comparative advantage in steel? Principle of Comparative AdvantageOpportunity Cost TableCountry 1 Steel Cost 1 Soybean CostCanada 1 soybean 1 steelBrazil 2 soybeans .5 steel Who has the comparative advantage in soy? Canada — comparative advantage in steelBrazil — comparative advantage in soybeansSpecialization & Comparative AdvantageProduction Possibilities Lines: Before TradeSoybeans (tonnes)Soybeans (tonnes)454035302520151210 5 030252015 10 4 05 10 15 18 20 25 305 8 10 15 20AB18 steel12 soybeans8 steel4 soybeansSteel (tonnes)Steel (tonnes)CanadaBrazil© 2002 McGraw-Hill Ryerson Ltd.25Macroeconomics, Chapter 17Figure 17-1Soybeans (tonnes)Soybeans (tonnes)454035302520151210 5 030252015 10 4 05 10 15 18 20 25 305 8 10 15 20AB30 steel 0 soybeans 0 steel20 soybeansSteel (tonnes)Steel (tonnes)CanadaBrazilProduction Possibilities: After Specialization© 2002 McGraw-Hill Ryerson Ltd.26Macroeconomics, Chapter 17Figure 17-1Comparative Advantagewhat will the terms of trade be? many possibilitiesfor trade to be mutually beneficial the terms of trade must be between each nation’s opportunity costsCountry 1 Steel Cost 1 Soybean CostCanada 1 soybean 1 steelBrazil 2 soybeans .5 steel Opportunity Cost TableComparative Advantagefor example:1 steel for 1.5 soybeansgains from trade can be illustrated with trading possibilities lineFigure 17-2454035302520151210 5 030252015 10 4 05 10 15 18 20 25 305 8 10 15 20ABCanadaBrazilSoybeans (tonnes)Soybeans (tonnes)Steel (tonnes)Steel (tonnes)Trading Possibilities Lines: After Trade1.5 soy for 1 steelTradingpossibilitieslineTradingpossibilities line.67 steel for 1 soy© 2002 McGraw-Hill Ryerson Ltd.29Macroeconomics, Chapter 17CanadaBrazilsteelsoybeanssteelsoybeansOutputs before specialization181284Outputs after specializationAmounts tradedOutputs available after tradeGains from specialization & trade300020-10+15+10-1520151052321Table 17-1Gains from TradeImproved OptionsAdded OutputA more realistic model:increasing opportunity costsless than complete specializationSpecialization & Comparative AdvantageSpecialization & Comparative AdvantageThrough free trade based on the principle of comparative advantage, the world economy can achieve a more efficient allocation of resources & a higher level of material well-being than without free tradeSide benefits:promotion of competition, deterrence of monopolylinking of national interests, reduction of national animositiesChapter 17 TopicsSome Key Facts of International TradeThe Economic Basis for TradeSpecialization & Comparative AdvantageSupply & Demand Analysis of Exports & ImportsTrade BarriersThe Case for Protection: A Critical ReviewThe World Trade OrganizationSupply & Demand Analysis of Exports & ImportsWhen world prices increase relative to domestic prices, domestic exports will increase, resulting in an upward sloping export supply curveWhen world prices decrease relative to domestic prices, domestic imports will increase, resulting in a downward sloping import demand curveCanadian Export Supply and Import DemandCdn. domestic aluminum marketCdn. export supply andimport demand10050SdDd1005075125150If the world priceexceeds the Cdn.price by 25 cents....Price (per kg. Cdn. dollars)Price (per kg. Cdn. dollars) $1.75 1.50 1.25 1.00 .75 $1.75 1.50 1.25 1.00 .75© 2002 McGraw-Hill Ryerson Ltd.36Macroeconomics, Chapter 17Figure 17-310050SdDd1005075125150EXPORTS = 50SURPLUS = 50Price (per kg. Cdn. dollars)Price (per kg. Cdn. dollars)Cdn. domestic aluminum marketCdn. export supply andimport demand $1.75 1.50 1.25 1.00 .75 $1.75 1.50 1.25 1.00 .75If the world pricegoes further up....© 2002 McGraw-Hill Ryerson Ltd.37Macroeconomics, Chapter 17Canadian Export Supply and Import DemandFigure 17-310050SdDdPrice (per kg. Cdn. dollars)Price (per kg. Cdn. dollars)1005075125150Cdn.exportsupplySURPLUS = 100EXPORTS = 100Cdn. domestic aluminum marketCdn. export supply andimport demand $1.75 1.50 1.25 1.00 .75 $1.75 1.50 1.25 1.00 .75If world pricesfall below $1.25....© 2002 McGraw-Hill Ryerson Ltd.38Macroeconomics, Chapter 17Canadian Export Supply and Import DemandFigure 17-310050SdDd1005075125150Cdn.exportsupplyPrice (per kg. Cdn. dollars)Price (per kg. Cdn. dollars)Cdn. domestic aluminum marketCdn. export supply andimport demand $1.75 1.50 1.25 1.00 .75 $1.75 1.50 1.25 1.00 .75SHORTAGE = 50IMPORTS = 50© 2002 McGraw-Hill Ryerson Ltd.39Macroeconomics, Chapter 17Canadian Export Supply and Import DemandFigure 17-310050SdDd1005075125150SHORTAGE = 100Cdn.importdemandCdn.exportsupplyPrice (per kg. Cdn. dollars)Price (per kg. Cdn. dollars)Cdn. domestic aluminum marketCdn. export supply andimport demand $1.75 1.50 1.25 1.00 .75 $1.75 1.50 1.25 1.00 .75IMPORTS = 100© 2002 McGraw-Hill Ryerson Ltd.40Macroeconomics, Chapter 17Canadian Export Supply and Import DemandFigure 17-3U.S. domestic aluminum marketU.S. export supply andimport demand $1.50 1.25 1.00 .75 .5010050$1.50 1.25 1.00 .75 .50 SdDd1005075125150SURPLUS = 50SURPLUS = 100U.S.exportsupplyEXPORTS = 50EXPORTS = 100SHORTAGE = 50IMPORTS = 50SHORTAGE = 100IMPORTS = 100U.S.importdemandPrice (per kg. Cdn. dollars)Price (per kg. Cdn. dollars)© 2002 McGraw-Hill Ryerson Ltd.41Macroeconomics, Chapter 17U.S. Export Supply and Import DemandFigure 17-4 1.25 1.12 1.00 Price (per kg. Cdn. dollars)World EquilibriumCdn.exportsupplyCdn.importdemandU.S.exportsupplyU.S.importdemandeWorld price is where:U.S. export supply =Cdn. import demand25© 2002 McGraw-Hill Ryerson Ltd.42Macroeconomics, Chapter 17Figure 17-5 1.25 1.12 1.00 Price (per kg. Cdn. dollars)World EquilibriumCdn.exportsupplyCdn.importdemandU.S.exportsupplyU.S.importdemande25Note the world price is HIGHER than the US domestic price before trade© 2002 McGraw-Hill Ryerson Ltd.43Macroeconomics, Chapter 17Figure 17-5 1.25 1.12 1.00 Price (per kg. Cdn. dollars)World EquilibriumCdn.exportsupplyCdn.importdemandU.S.exportsupplyU.S.importdemande25Why would the US be willing to pay $1.12 when they can produce it themselves at $1.00?© 2002 McGraw-Hill Ryerson Ltd.44Macroeconomics, Chapter 17Figure 17-5 1.25 1.12 1.00 Price (per kg. Cdn. dollars)World EquilibriumCdn.exportsupplyCdn.importdemandU.S.exportsupplyU.S.importdemande25Earnings from US exports allow Americans to import other goods more cheaply© 2002 McGraw-Hill Ryerson Ltd.45Macroeconomics, Chapter 17Figure 17-5PW set by interaction of world demand and supplyonly one price can persist for a standardized commodity (ignoring transportation costs and trade barriers)Supply & Demand Analysis of Exports & ImportsChapter 17 TopicsSome Key Facts of International TradeThe Economic Basis for TradeSpecialization & Comparative AdvantageSupply & Demand Analysis of Exports & ImportsTrade BarriersThe Case for Protection: A Critical ReviewThe World Trade OrganizationTrade BarriersTariffsRevenue tariffsProtective tariffsImport QuotasNon-tariff Barriers (NTB)Voluntary Export Restrictions (VER)pricequantitysupplydemandpDpWaqdEffects of a TariffDomestic Marketimportsopen to world markets:quantity demanded increases to dquantity supplied decreases to aimports are d-aFigure 17-6pricequantitysupplydemandpDpWaqdEffects of a TariffpTbcDomestic Markettariffeffects of a tariff:price rises to pTquantity supplied increases to bquantity demanded decreases to cimports are c-bimportsFigure 17-6pricequantitysupplydemandpDpWaqdEffects of a TariffpTbcDomestic Marketimportstariff revenue= (c-b)X(pT-pW)=imports X tariffFigure 17-6Economic Impact of TariffsDecline in consumptionIncreased domestic productionDecline in importsTariff revenueIndirect Effects:expansion of inefficient industries at the expense of relatively efficient onesEconomic Impact of Quotasthe same, without the tariff revenue for the governmentforeign firms reap the benefit of higher pricespricequantitysupplydemandpDpWaqdEffects of a QuotapQbcDomestic Marketimportsprice with quota is pQ, which again reduces importsimportsimportsimportsFigure 17-6Net Costs of Tariffs & QuotasConsumer costsprice of imported product goes upsome consumers shift purchases from imports to higher-priced domestic goodsprices of domestic goods risecosts to consumers greatly exceed gains to producers & governmentNet Costs of Tariffs & QuotasImpact on Income Distributionlow-income families affected proportionately moreChapter 17 TopicsSome Key Facts of International TradeThe Economic Basis for TradeSpecialization & Comparative AdvantageSupply & Demand Analysis of Exports & ImportsTrade BarriersThe Case for Protection: A Critical ReviewThe World Trade OrganizationThe Case FOR ProtectionMilitary Self-Sufficiency ArgumentIncrease Domestic Employment Argumentjob creation from importsfallacy of compositionpossibility of retaliationlong-run feedbacks Diversification for Stability ArgumentThe Case FOR ProtectionInfant Industry ArgumentCounterarguments:which industries?how long?other better methodsStrategic Trade PolicyThe Case FOR ProtectionProtection Against Dumping Argument Driving Out Competitors Price DiscriminationCheap Foreign Labour ArgumentThe Case FOR Protection: A Critical Reviewthe arguments for protection are not convincingthere is compelling historical evidence that free trade has led to prosperity & protectionism has led to the oppositeChapter 17 TopicsSome Key Facts of International TradeThe Economic Basis for TradeSpecialization & Comparative AdvantageSupply & Demand Analysis of Exports & ImportsTrade BarriersThe Case for Protection: A Critical ReviewThe World Trade OrganizationThe World Trade OrganizationTrade liberalizations to be implemented by 2005:tariff reductionsnew rules for trade in servicesreductions in agricultural subsidiesnew protections for intellectual propertyphasing out quotas on textiles & apparel, & replacing them with declining tariffsThe World Trade OrganizationWTO has become the target of protest groupsDebates about linking trade liberalization to other political & economic causesChapter 17 TopicsSome Key Facts of International TradeThe Economic Basis for TradeSpecialization & Comparative AdvantageSupply & Demand Analysis of Exports & ImportsTrade BarriersThe Case for Protection: A Critical ReviewThe World Trade Organization