Are Global Trade Patterns Consistent with economic theory?
经济学essay代写 Specifically talking about trade or as the era of globalization suggests . International trade we mainly refer to···
Specifically talking about trade or as the era of globalization suggests . International trade we mainly refer to the exchange of goods and services taking place between countries under certain conditions. Another important aspect of globalization has been that almost all countries or economies today are open economies . Which mean they are involved in international trade where import and export of goods always take place.
Now the biggest question that may arise in an individual mind is- why do countries’ trade or integrate their domestic markets with the world market? The most reliable explanation can be given as the gains from trade. If relative commodity prices differ between countries in the absence of trade . Both countries can gain by exchanging commodities at any intermediate price ratio. Such benefits or gains can be explained elaborately through certain theoretical explanations or traditional economic theories of trade –
Economic theories of Trade 经济学essay代写
Model 1: Trade benefits both countries
For simplicity here we consider a two country model , i.e. we show that . Two countries are indulged in international trade and as per the theory they are mutually benefitted through such trade. Countries’ welfare has been demonstrated through indifference curve . Which also show the bundle of goods the country can afford – under no trade situation and under international trade (Freeman, 2004). The concept of budget line and relative prices(terms of trade) has also been used for this theoretical explanation. For using this concept we further assume that two commodities are being traded – X and Y.
Here we denote one country as the Home Country and the other one as the Foreign Country.经济学essay代写
reflects the benefits or gains that the home country receives from international trade. The two budget lines CED and AEB have been drawn. These budget lines also represent different set of relative prices for the country. Trade triangle is denoted by EFG where FG shows the amount of imports and GE shows the amount of imports.
Without trade the country had to be content with the consumption bundle they were receiving at point E. it is only due to trade with the other nation that the country is allowed to reach the consumption bundle at point F. F is also regarded as the best consumption point along the budget line. Thus it is obvious that the Home Country benefits from international trade. The same can be proved for the Foreign Country as well as shown in the figure below-
Figure 1.2 经济学essay代写
reflects the benefits or gains that the Foreign Country receives from international trade. The budget lines are given by A*E*B* and C*E*D* which also represents the relative prices. The trade triangle is given as E*F*G*, where E*G* shows the amount of exports and G*F* shows the amount of imports. Without trade the country would have valued both the goods at the point E*, but the situation in the Foreign Country has changed due to trade.
The intermediate price ration is noticeable here with the low price of X in the Home Country and the high price of X in the Foreign Country. Thus it is evident that the foreign country also benefits from international trade (Glyn, 2004).
Thus from the above theoretical model it may be concluded that . A divergence in the relative price of commodities in the two countries before trade indicates a mutual potential gain from trade for both countries at a common intermediate price ratio.
Besides exchanging both the goods it should be noted that the two countries – Home Country and Foreign Country can also derive further gains from intra- industry trade as well as inter industry trade (Krueger, 1998).
Model 2: Comparative advantage and Trade 经济学essay代写
While discussing the economic theories of trade . It is also important to mention about the concept of comparative advantage situation which actually allows the trade to happen. In fact it is due to the comparative advantage situation that . The countries pour out of their local markets and channelize its resources in a more proper manner at the given world market prices.
This comparative advantage only has laid out the concept of globalization, i.e. integration of the domestic markets with the foreign markets or the world market overall. We now involve production possibilities schedule . And the assumption of two country and two goods in the model at the backdrop of comparative advantage to show the gains from trade for the Home Country and Foreign Country. The theoretical explanation is given along with the diagrams below-
Figure 2.1 经济学essay代写
shows the gains from trade in the Home Country through the production possibilities curve as a result of comparative advantage. The trade triangle is given as BAD, where the country exports DA amount of X and imports BD amount of Y. If the country is not allowed to trade the production . And consumption possibilities will be restricted to PQ with E being the best consumption point.
It also shows the pre trade relative price. The post trade world prices are shown by AB. This line also shows the increase in consumption possibilities through the new expanded locus . And B is considered to be the desired consumption point. Thus there is an increase in consumption as well as increase in production resulting in the increase in real income for the Home Country.
Figure 2.2 经济学essay代写
shows the gains from trade for the Foreign Country as a result of comparative advantage. The trade triange is given B*A*D*,where B*D* being the amount of imports and A*D* being the exports. The Foreign Country also gains from trade as consumption rises from E* to B* and ultimately a rise in real income as well (Rodrik, 1998).
The flatter production possibilities curve for the Home Country as compared to that of the Foreign Country is noticeable . Because it shows the comparative advantage of the Home Country in producing X . And has a lower relative price for X than the Foreign Country. Here the object of comparison which determines the comparative advantage is the pre trade cost ratio of one country as opposed to that of another country. Thus it may be concluded that the world market trading benefits both the countries . As the production possibilities curve itself expands due to global trade.
Model 3: Global Trade and Inequality of Nations 经济学essay代写
As per the eminent economist Paul Krugman, international trade has been the driving factor behind inequality of wages (Krugman, 1993). But this is due to the combined effect of both technology and trade upon the factor prices. But Krugman has also claimed that globalization has been the main reason behind the inequality of nations.
To prove this claim, he has presented a model for a small open economy . With the focus upon the manufacturing sectors. He considered a small manufacturing sector under imperfect competitive structure. This sectors produce both intermediate as well as finished goods. These intermediate goods create demand linkages between . And they show a tendency towards manufacturing agglomeration.
We assume same manufacturing industry for all economies at high transport cost. But as transport cost tends to fall below a critical value . All nations which find themselves in the core periphery suffer a decline in real income. With continuation in fall of transport cost a state of convergence takes place gradually with respect to real income . Where peripheral nations gain and the core nations loose.
It is seen that rise in international trade or trade liberalization creates a strong incentive . For those imperfectly competitive industries to concentrate in the central region for those large markets. Thus we have lower wages in the periphery as compared to the center. Relative wages and periphery do diverge in the early stages of trade. This leads to inequality between nations as a result of global trade (Krugman, Trade and wages, reconsidered, 2008).
Real life examples: Case Examples 经济学essay代写
We now consider some real life case examples to show the consistency of the global trade patterns with the above discussed economic theories of trade. The case examples of both developed and underdeveloped countries have been taken into consideration.
Case Example 1: Comparative Advantage 经济学essay代写
For instance, we can point out the real life examples of some of the developed countries like Japan which exports automobiles and other consumer durables to a large extent to meet up its expenses for oil and other raw materials in the world markets (KUBOTA & PFANNER, 2015). Even for developed countries like United States which has more or less a balanced productive structure relies on export trade for some of its sectors.
In this context of real life examples we can say that the economic theory of comparative advantage is quiet consistent with the global pattern of trade. Some of the Asian countries which have similar patterns of comparative advantage have achieved remarkable success in export oriented development after ASEAN 4 agreed to a free trade area in 1994.
Trade also helped to achieve full employment in some of the newly emerged superpowers like Hong Kong and Singapore after an integration of US-Mexico border type. These countries also have been subcontracting their production to other parts like Indonesia and Malaysia.
Case example 2: Manufacturing sector 经济学essay代写
The recent global trade patterns have shown a decline in trade for manufactured goods for many developed economies and UK stands out to be one of them. As per the recent reports UK trades more in commercial and financial services as compared to manufactured goods in recent times. In fact less national output is also being generated from the manufacturing sector.
As per the share of manufactured goods in world trade, share of US has fallen to 15% recently. Some countries like Russia are reportedly suffering in the world market due to the quality of their manufactured goods and the pressure of international competition. The recent data also indicates that as a percentage of world GDP, international trade has increased to 60% by 2014.
The projections till 2020 shows more dramatic changes in world trading patterns especially for the European member countries and it is expected that global organizations like IMF, World Bank G7 and G20 will adapt themselves considerable to remain legitimate representatives of the world (European Central Bank (ECB), 2008).
Case Example 3: Gains from Trade 经济学essay代写
All participants of free trade- whether developed or underdeveloped countries have gained in ones respect, i.e. access to larger international markets. The economies become more competitive due to integration of the world markets with the domestic ones as well as it give the economies more opportunities for international division of labor.
Efficiency thus increases due to international specialization a foreign competition. In fact international trade is also the main ingredient the rising trend of urbanization observed throughout the world. Although developed countries still prefer to trade among themselves, their share of exports has increased in recent times.
Diversification in the export structure particularly among the developed countries is a striking feature of the emerging global trade patterns. Low cost, Labor intensive imports from the developing countries have pushed the wage gap between skilled and unskilled laborers for developed countries like United Kingdom and United States (Slaughter, 1999).
East Asian Economies or the Chinese economies like Hong Kong 经济学essay代写
And Singapore has been the chief gainers from international trade emerging as the new superpower and rising economies whereas trade has not significantly benefitted the Sub Saharan African regions whose share in world trade has been continuously declining since the 1990s.
The emerging global trade pattern has also led the international organizations like WTO and GATT to advocate for free trade in recent times rather than adopting protectionism (O’Neill & Terzi, 2014). However Japan’s export growth is likely to slow down in the upcoming years . As the country’s recent export volume has exceeded her domestic production.
However the recent global trade pattern has also led to emergence of regional trading blocs. Some examples of these trading blocs are NAFTA . European Union etc. the demerit of such creation of regional trading blocs has been that . It has led to trade creation between member countries . While the countries remaining outside these trading blocs have suffered from trade diversion.
图1.2反映了外国从国际贸易中获得的收益或收益。预算线由A * E * B *和C * E * D *给出，它们也代表相对价格。贸易三角形的形式为E * F * G *，其中E * G *显示出口量，G * F *显示进口量。没有贸易，该国将在E *点对这两种商品进行估值，但是由于贸易，国外的情况已经改变。这里的中间价格比很明显，在本国X的价格低，而在国外X的价格高。因此很明显，外国也从国际贸易中受益（Glyn，2004）。
图2.2显示了比较优势带来的外国贸易收益。贸易三角的给定为B * A * D *，其中B * D *为进口量，A * D *为出口。随着消费从E *增长到B *，并最终也增加了实际收入，外国也从贸易中受益（Rodrik，1998）。
例如，我们可以指出一些发达国家的现实生活中的例子，例如日本，它们在很大程度上出口汽车和其他耐用消费品，以支付其在世界市场上购买石油和其他原材料的费用（久保田＆PFANNER， 2015）。即使对于像美国这样的发达国家而言，其生产结构或多或少都具有均衡性，其某些部门也依赖出口贸易。在现实生活中，我们可以说比较优势的经济学理论与全球贸易格局相吻合。 1994年东盟4同意建立自由贸易区后，一些具有类似比较优势模式的亚洲国家在出口导向型发展方面取得了显著成就。贸易还有助于在一些新兴的超级大国中实现充分就业，例如香港和新加坡。整合美墨边境类型后的新加坡。这些国家还一直将其生产分包给印度尼西亚和马来西亚等其他地区。