4.1 “Globalization”
“Globalization”
Means different things to different people
1. The increasing world-wide integration of markets for goods, services and capital.
2. Also the role of MNCs, IMF, WTO, World Bank.
3. Elsewhere: domination by United States.
Some see good, others bad
Bad: reading by powell
Good: reading by Bhagwati
Some aspects of globalization declined with the world recession of 2008
The Economist, on Nov 15, 2014, reported “Signs of Life”:
Globalization is back
Various measures of globalization (though not all) have risen past their previous peaks
The “depth” of trade (its volume) has increased
The “breadth” of trade (number of borders crossed) has not fully recovered
International Economics
Is NOT about countries
It IS about interactions among countries
4.2 Elements of the World Economy
World Economy consists of
Countries: a few hundred
(CIA lists about 240)
(WTO has 160 members)
People: over 7 billion
1/5/15, compare 320 m. US)
Land: about 15 times the US
An excellent source of information about countries is the CIA World Fact Book
(Just Google “fact book”)
World Economy consists of
GDP (2013 est., per CIA, in US$)
World: Total = $87.25 trillion
per capita = $13,100
US: Total = $16.72 trillion
per capita = $52,800
Implication
US is very unusual
Very rich
US has less than 5% of world population but almost 20% of world income
4.3 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* |
2307 |
15.3 |
US |
2329 |
15.4 |
China |
2209 |
14.7 |
EU-28* |
2235 |
14.8 |
US |
1580 |
10.5 |
China |
1950 |
12.9 |
Japan |
715 |
4.8 |
Japan |
833 |
5.5 |
Korea, S. |
560 |
3.7 |
Hng Kng |
622 |
4.1 |
World |
15047 |
100.0 |
World |
15121 |
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 |
2009 |
2010 |
2011 |
2012 |
2013 |
All Products |
17,590 |
|
|
|
|
|
|
|
Agriculture |
1,745 |
9 |
9 |
–12 |
15 |
22 |
0 |
6 |
Fuel&Mining |
3,997 |
16 |
10 |
–36 |
33 |
35 |
2 |
–3 |
Manuf. |
11,848 |
9 |
6 |
–20 |
19 |
15 |
0 |
3 |
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 |
2009 |
2010 |
2011 |
2012 |
2013 |
All Products |
17,590 |
|
|
|
|
|
|
|
Agriculture |
1,745 |
9 |
9 |
–12 |
15 |
22 |
0 |
6 |
Fuel&Mining |
3,997 |
16 |
10 |
–36 |
33 |
35 |
2 |
–3 |
Manuf. |
11,848 |
9 |
6 |
–20 |
19 |
15 |
0 |
3 |
Iron & Steel |
454 |
17 |
6 |
–45 |
30 |
25 |
–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 |
2009 |
2010 |
2011 |
2012 |
2013 |
All Products |
17,590 |
|
|
|
|
|
|
|
Agriculture |
1,745 |
9 |
9 |
–12 |
15 |
22 |
0 |
6 |
Fuel&Mining |
3,997 |
16 |
10 |
–36 |
33 |
35 |
2 |
–3 |
Manuf. |
11,848 |
9 |
6 |
–20 |
19 |
15 |
0 |
3 |
Iron & Steel |
454 |
17 |
6 |
–45 |
30 |
25 |
–8 |
–6 |
Automotive |
1,348 |
10 |
5 |
–31 |
29 |
18 |
1 |
4 |
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 |
16720 |
9% |
Japan |
5007 |
14% |
Germany |
3593 |
42% |
Canada |
1825 |
25% |
India |
1670 |
19% |
Mexico |
1327 |
28% |
Netherlands |
722 |
80% |
Singapore |
296 |
139% |
Philippines |
272 |
17% |
Nepal |
19 |
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.
Importance of Trade for Countries?A Few More of Interest
|
GDP |
Exports/GDP |
China |
9330 |
24% |
Hong Kong |
272 |
168% |
Korea, South |
1198 |
47% |
Korea, North (2009) |
28 |
7% |
Burma |
59 |
15% |
Syria |
65 |
6% |
Israel |
273 |
22% |
Source: CIA World Fact Book
Ways that countries interact economically
Capital Flows
Financial (holdings of financial assets abroad)
Currency
Bank deposits
Bonds – private and government
Stocks
Bank loans
Real (international ownership of real assets)
Real estate
Capital assets (plant and equipment)
Stocks (equities) if ownership share is large
Other
Data, below, are stocks (i.e, amounts at a point in time)
US Investment Position ($ trillion at market value, year-end 2011)
|
We “Own” US Assets Abroad |
We “Owe” Foreign Assets in US |
Total |
16.43 |
20.58 |
US Gov’t |
0.71 |
4.28 |
Private financial |
11.03 |
13.40 |
Private real |
4.68 |
2.91 |
Source: Economic Report of the President, Feb 2013, Table B-107
Compare: US GDP in 2012 = $16.02 trillion
US Investment Position
(Qualification: “Owe” isn’t quite right. This includes all assets in the US owned by foreigners, including land, buildings, etc. Not just what we’ve borrowed.)
Lessons:
US is a large net “debtor” (result of our spending more than we earn)
Most of this today is government, but some is private
Other ways that countries interact economically
Migration
Temporary
Guest workers
Day workers
Permanent
In practice, most (all?) countries limit migration severely