Ways that Countries Interact

• Ways that countries interact economically

– Trade (per CIA, 2013 est.)

• World exports: $18.71 trillion

(compare world GDP of $87 trillion)

• World trade has grown faster than world GDP most years

– But not during 2008-9, due to world recession

• See tables below for

– Who trades most?

– Who trades with whom?

– Share of trade in GDP

– US:

• What do we export/import?

• To/from whom?

Who Trades the Most? ($ b. & % share, 2013)

Exporters	Importers
	Value	Share		Value	Share
EU-28*		15.3	US		15.4
China		14.7	EU-28*		14.8
US		10.5	China		12.9
Japan		4.8	Japan		5.5
Korea, S.		3.7	Hng Kng		4.1
World		100.0	World		100.0

Source: WTO, International Trade Statistics, 2014, Table I.8

Who Trades the Most?

• Developed countries are the biggest traders

• China is catching up, in trade volume

– It was the #3 exporter six years ago when I taught the course; now it’s #2 and closing in on EU.

– Others are gaining as well: Four years ago Canada was #5 exporter. Three years ago that was S Korea

• See Economist from about a year ago: “Trading Up: Picking the world champion of trade”

– China claimed to have surpassed US. True only for goods, not goods + services

• But with time China will pass US in both

– China’s trade per GDP is much larger than the US, but below world average

– Much of the value in China’s exports is imported inputs, thus low “value added.”

• “Emerging Markets” in general are catching up to, or surpassing, the developed countries

– In GDP, trade, and more

– See Economics Focus from The Economist, “Why the Tail Wags the Dog”

What Does the World Trade? ($ b. 2013 & annual % growth rates, merchandise exports)

	Value	00-05	05-13
All Products	17,590
Agriculture	1,745			–12
Fuel&Mining	3,997			–36				–3
Manuf.	11,848			–20

Source: WTO, International Trade Statistics, 2014, Table II.1

What Does the World Trade?

• Biggest traded category: manufactures

• Fastest growing, then shrinking, then growing: “fuels & mining”

Why?

• Because this is the value of trade, and prices of oil and other raw materials were rising, and then falling.

But within Manufactures, Iron & Steel is even more volatile:

What Does the World Trade?($ b. 2013 & annual % growth rates, merchandise exports)

	Value	00-05	05-13
All Products	17,590
Agriculture	1,745			–12
Fuel&Mining	3,997			–36				–3
Manuf.	11,848			–20
Iron & Steel				–45			–8	–6

Source: WTO, International Trade Statistics, 2014, Table II.1

Reason: Very sensitive to investment, thus to expansion and contraction.

What Does the World Trade?($ b. 2013 & annual % growth rates, merchandise exports)

	Value	00-05	05-13
All Products	17,590
Agriculture	1,745			–12
Fuel&Mining	3,997			–36				–3
Manuf.	11,848			–20
Iron & Steel				–45			–8	–6
Automotive	1,348			–31

Source: WTO, International Trade Statistics, 2014, Table II.1

What Does the US Trade?($ b. 2011)

	Exports	Imports
Total	1,497.4	2,235.8
Agriculture	140.0
Petroleum		462.3
Industrial supplies	496.4	319.8
Capital goods, exc. auto	493.2	513.4
Automotive	133.1	255.2
Other non-ag	234.6
Other non-petrol		685.1

Source: Economic Report of the President, Feb 2013, Table B-104.

What Does the US Trade?

US imports are much larger than US exports (We’ll see what that means later in the course.)

US is a big…

-Exporter of agricultural products

-Importer of oil

-Exporter and importer of capital goods (i.e., machines for making things)

Importance of Trade for Countries? (GDP in US$ b., Exports % of GDP, Selected countries, 2012)

	GDP	Exports/GDP
United States		9%
Japan		14%
Germany		42%
Canada		25%
India		19%
Mexico		28%
Netherlands		80%
Singapore		139%
Philippines		17%
Nepal		5%

Source: CIA World Fact Book

Importance of Trade for Countries?

• Even though we trade more than most, US trade is a smaller part of US GDP than for many other countries

• Others that are low: Japan, Nepal (even lower than US)

• Note Singapore: Exports can be more than GDP.

– Reason: Exports are made using imported inputs, so value of exports includes imports.