As an International Business student at the University of Georgia, one is required to take a class called International Business Environment. When I first arrived in the class and saw my Ph.D., Jerry Garcia fanatic professor, I felt as if I was truckin’ myself through another class. Yet, as my Chinese writing became unbearably advanced and Spanish reading deeply profound, I started to realize why it was called International Business Environment. The students I was surrounded by came from all different cultures. Spanish, Japanese, or Swedish; I was gathering a cultural awakening of globalization. At the time, I spent a lot of my time focusing on Chinese writing and listening to a lot about gold. Who knew these things matter with the flow of information of Europe’s banking crisis in slew. I took the class for a year and it opened my eyes to the real meaning of the name. I was creating an environment of knowledge for the future of our global economy.
One of the argumentative essays I remember debating was the question of are we sure international trade is beneficial? The 1817 Theoretical Models would like to argue yes. The creation of an integrated market as a result of international trade results in a wider range of choices for consumers, lower prices, and more firms that are operating at a larger scale. In order for one to see the value of international trade, one should look at the value of GDP. GDP is the value of goods and services produced in an economy in one year. Intermediate goods, or exports/imports, must also count in these calculations. Historical evidence and degree of integration will point to the two flows in our economy. Trade Flows are the dollar value on amount of stuff going back and for. Labor Flows are how many people are coming and going. Some people open to immigration and price similarities across markets. Yet, if econ-completely open, a care here would cost the scene in Japan. Capital Flows: Financial and physical (Equipment, Machines, Factories) not just actual money, but also equipment.
World trade patterns can be seen in 4 factors:
- Size (population)
- Stage of development
These will affect trade factors how? Obviously the size of the economy of the country matters. It’s also important to understand that barriers from governmental policies will change from country to country. The NAFTA trade agreement was a special agreement with Native American Countries. It does not allow for trade with Cuba and has very few borders with Puerto Rico. Borders do matter however. For example, just look at the Canada US example. Distance matters also in the analysis of international trade due to distribution having negative (inverse) relationships because of shipping costs and maintaining relationships. What does the United States trade? The United states trades heavily in Agricultural, Mining, Services, and Manufacturers. It’s World Exports and Output in real terms growth 1950-2007. Since 1950, world trade/world GDP 5.5%.
Openness Index country=how open country is to trade. Import + Export/GDP. Netherlands-open. U.S.-closed What does the trade to GDP ratio reveal? Service outsourcing are the things we did domestically that we export. For example, telephone call centers and software developments.
Are we in New Era of Trade? Yes! New global markets, communications, technology, and transportation have shaped the way that countries look at logistics. Rapid technological trade in Iphones, computers, e-mail, video conferences. Late 1800’s introduction of telegraph. Business and financial sector innovation (cash, bonds, mutual funds, etc.). Trade policy liberalization. Widespread protest against immigration. Between 1870 and 1914 they would become a rapid change in the U.S. economy.Railways, steamships, telegraphs would open up new ways of transportation and communication. There was new business model developments of that tricky thing called the stock market. With these changes, many nations changed policies that would create popular protests.
New about trade policy today? Technology, Changing mix of goods, Flexible exchange rates. Deep integration-more closed; health and safety regulations. Shallow integration-more integrated; have a lower set of tariffs/quotas. RTA’s-regional trade associations. Multilateral organizations-world wide, International Monetary Fund, World Trade, NAFTA.
International Economic Institutions contain rules and organization that govern and constrain behavior. They may be formal by having a written set of rules that explicitly state what is and not allowed. Or they may be informal by having customs or traditions that define appropriate behavior.
Bretton Woods, NH July 1944-International Monetary Fund.