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1、International EconomicsPrepared for Dingying Experimental Class in Economics & ManagementSouth China Agricultural UniversityInternational EconomicsBy Robert J. Carbaugh10th EditionChapter 1:The International Economy and GlobalizationElements of interdependenceTrade: goods, services, raw materials, e

2、nergyFinance: foreign debt, foreign investment, exchange ratesBusiness: multinational corporations, global productionEconomic interdependenceForces driving globalizationTechnological change: ProductionCommunication & informationTransportLiberalization of trade & investment:Tariff, non-tariff barrier

3、 reductionsLiberalized financial transactionsInternational financial marketsEconomic interdependenceWaves of Globalization1st wave: 1870-1914Falling tariff barriersimproved transportation2nd wave: 1945-1980Agreements to lower barriers againRich country trade specializationPoor nations left behind3rd

4、 wave: 1980-presentGrowth of emerging marketsinternational capital movements regain importanceEconomic interdependenceExports and Imports of goods and services as a percentage of Gross Domestic Product, 2002Economic interdependenceCountryExports (% of GDP)Imports (% of GDP)Netherlands5346Norway3118S

5、outh Korea2726Canada3733Germany3125France2221United Kingdom1821Mexico2830United States913Japan108Leading trading partners of the United States, 2002Economic interdependenceValue of USValue of USCountryexports ($ bill.)imports ($ bill.)Canada$160.8$213.9Mexico97.5136.1Japan51.4124.6China 22.1 133.5Ge

6、rmany26.663.9France19.329.0Italy10.125.4Netherlands18.310.3Belgium/Luxembourg13.84.4Venezuela4.515.8Australia13.16.8Interdependence: ImpactOverall standard of living is higherAccess to raw materials & energy not available at homeAccess to goods & components made less expensively elsewhereAccess to f

7、inancing and investment not available at homeInternational competition encourages efficiencyEconomic interdependenceInterdependence: Impact (contd)Other impacts - good & badCurtails inflationary pressures at homeLimits domestic wage increasesMakes economy vulnerable to external disturbancesLimits im

8、pact of domestic fiscal policy on economyEconomic interdependenceComparative advantage means:If the relative cost of making two items is different in two countries, each can gain by specializing in the one it makes most cheaply - each has a comparative advantage in that productEven countries that ma

9、ke nothing cheaply can benefit from specializationComparative advantageCommon fallacies of international tradeTrade is zero-sum - trade can bring benefits to both partnersImports bad, exports good - if you buy nothing from other countries, they have no e to buy from youTariffs and quotas save jobs -

10、 cutting imports makes it harder to export, so other jobs are lostEconomic interdependenceCompetitiveness & tradeMain objective of any nation is to generate high and rising standard of livingNo nation can efficiently make everything itselfInternational trade allows countries to focus on producing wh

11、at they make efficientlyInefficient sectors will be squeezed outSectors open to competition e more efficient and productiveComparative advantageUps and downs of globalizationAdvantagesProductivity increases faster when countries produce according to comparative advantageGlobal competition and cheap

12、imports keep prices low and inflation at bayAn open economy encourages technological development and innovation with ideas from abroadJobs in export industries pay more than those in peting industriesFree movement of capital gives the US access to foreign investment and keeps interest rates lowEcono

13、mic interdependence: globalizationUps and downs of globalizationDisadvantagesMillions of US jobs lost to imports or production abroad; those displaced find lower-paying jobsMillions of other Americans fear getting laid offWorkers face pressure for wage concessions under threat of having the jobs move abroadService and white-collar jobs are joining blue-collar ones in being vulnerable to