Transcript Welcome to International Economics

CDAE 272
International Economic
Development
Spring 2008
Class 04
Jan. 24
Last class:
1. Introduction
Today:
1. Introduction
Quiz 1
Next class:
2. Measuring economic growth & development
Reading:
Reading package: Introduction
Important date:
Problem set 1 due Tuesday, Feb. 5
(To be posted on the class website on Jan. 25)
Questions from the class
1. How to calculate growth rate when it is negative?
Example 1. If the per capita GNP dropped from
$1500 in 2006 to $1455 in 2007, what was the
growth rate?
Example 2. If the per capita GNP dropped from
$2000 in 2005 to $1805 in 2007, what was the
average annual growth rate?
Questions from the class
2. Could you give one example that has different
contributions to GNP and GDP?
A small broom company, located in Swanton, VT,
produced 1,000 brooms and sold them at $10 each in
2007. The 1,000 wood handles were purchased from
Canada at $2 each and the 5,000 lbs of straws were
purchased from Swanton at $0.5 per lb. It is a family
business without any hired worker and the owners are
Canadian citizens. What are the contributions to
Canadian GNP and GDP and U.S. GNP and GDP?
1. Introduction
1.1.
1.2.
1.3.
1.4.
1.5.
Economic growth and globalization
Rapid growth in world trade
Development patterns of selected nations
The U.S. economy and international trade
Potentials and challenges
1.2. Rapid growth in world trade
1.2.1. International trade and indicators
-- Exports and imports
-- Trade deficit or surplus
Balance of trade = Exports - Imports
-- Trade barriers (restrictions)
-- Index of openness
-- How to calculate the index?
= Export / GDP
-- How can it be greater than 100%?
-- Economic freedom index
U.S. balance of trade
China’s exports and imports ($ billion)
700
600
Exports & imports
500
400
300
200
100
0
1950
1960
1970
1980
Year
1990
2000
2010
Index of openness (exports/GDP)
China (mainland)
India
Indonesia
Egypt
Hong Kong
Canada
UK
USA
Japan
Singapore
1980
6%
6%
34%
31%
90%
28%
27%
10%
14%
215%
1998
22%
12%
28%
17%
125%
41%
29%
12%
19%
187%
Economic freedom index
Hong Kong
Singapore
New Zealand
United Kingdom
United States
Australia
Ireland
Switzerland
Luxembourg
Netherlands
Argentina
Bolivia
Canada
9.3
8.9
8.8
8.7
8.5
8.5
8.5
8.4
8.4
8.3
8.3
8.3
8.2
Assignment:
Google search “economic
freedom index” and find the
five nations with the lowest
economic freedom indexes
1.2. Rapid growth in world trade
1.2.2. Growth in world trade since 1950
-- World GNP and exports
-- Major factors for the increase in trade
World GNP and Export
1950 1960 1970 1980 1990 2000
Trade (index):
GNP (index):
100
200
480
790
1160
2010
100
150
260
390
505
620
1.2. Rapid growth in world trade
1.2.3. Trends of world trade
-- Likely to increase at significant rates
-- Increasing negotiations and disputes
-- Distribution and redistribution of the benefits and
costs of international trade
-- World trade under WTO
1.3. Development patterns of selected nations
Read the reading package and pay
attention to the economic indicators we
have discussed in classes.
1.4. The U.S. economy and international trade
-- Read pages 1-13 to 1-15
-- Trade deficit (billion dollars)
1970:
1980:
1990:
2003:
2004:
2005:
2006:
Total
-1.2
14.9
80.7
496.0
618.0
725.8
830.0
With China
10
124
161
201
232
(12%)
(25%
(26%)
(28%)
(28%)
http://www.americaneconomicalert.org/ticker_home.asp
1.5. Potentials and challenges
1.5.1.
1.5.2.
1.5.3.
1.5.4.
Rapid increase in trade
More and more disputes
Free trade vs. government interventions
Development issues related to trade
-- Environment
-- Poverty and inequity
…...
1.5.5. World trade under WTO
-- Functions
-- Efficiency
…...
A comparison of pork product prices
(US dollars per pound)
Loin
Lung
Pork stomach
Pork kidney
Lard
Pork feet
Boneless butt
Nape of neck with bone
China
1.20
0.24
2.16
1.54
0.72
0.87
1.20
1.32
United States
1.32
0.03
0.54
0.17
0.25
0.20
0.81
0.10
U.S. ag. export to China
(thousand dollars)
Values in 1000 dollars
250,000
200,000
Fats, oils, greases
Vegetables & prep
Dairy prods
Poultry & prods
Red meat & prods
150,000
100,000
50,000
0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
McDonald’s in China
(number of restaurants)
600
Mainland
HK
Taiwan
500
400
300
200
100
0
1987
1990
1993
1996
1999
2002