SCHOOL OF ECONOMICS AND BUSINESS

UNIVERSITY OF PORTO

1EC305: INTERNATIONAL TRADE

Chapter 1 - Introduction
1.1. International Trade in the context of Economics
1.2. Recent trends in the world economy
globalization of markets and globalization of
production international trade and foreign direct
investment (FDI)

International trade in the context of Economics

2

International
Economics

International
Finance:
focuses on the
monetary aspects of
international economic
relations

International trade:
analyzes the trade of
goods and services
between residents of
different countries
Subject that we will study

Main manufacturing producers (2011)

3

The global map of manufacturing production, 2011

Source: Dicken , Peter (2015, p.38), Global Shift (7th Ed.)

Main manufacturing producers(2011)

4

Source: Dicken , Peter (2015, p.38), Global Shift (7th Ed.)

The evolution of the world economy

over the last 60 years
5

High economic growth...

... but even higher growth of
international trade.
Expansion of industrialization into
new areas:

newly industrialized countries,

especially in Asia;
re-emergence of countries with large
industrial traditions in Latin America
and Eastern Europe.

Globalization
6

Globalization (economic):

interconnection of economic activities on a

global scale:
Through

people;

movements of goods, capital and

Globalization represents an expansion of how

individuals and institutions trade and exchange
with others in countries other than their own, or
influence them with their economic and social
behaviour
CEPR Policy paper no.8 (2002: p.1)

Growth in world trade, 1950-2013

7

World merchandise exports and GDP, 1950-2013 (Annual percentage change)

20%
15%
10%
5%
0%
-5%
-10%
-15%
Exports

Source: WTO, International Trade Statistics 2014

GDP

Volume of world merchandise exports, 1950-2013

(index, 2005=100)

140
120
100
80
Exports

60

40
20
0

Source: WTO, International Trade Statistics 2014

The causes
9

Liberalization of world trade:

Reduction in transportation costs:

multilateral trade agreements (GATT/WTO);

regional integration (EU, NAFTA, Mercosul,
ASEAN, FTAA);

containerisation;
air travel and transport.

Reduction in the costs of communication

and coordination:

maturity of older information technologies;

new information technologies.

The causes: liberalization of world trade

10

Evolution of the international trade regulatory

framework: from the GATT to the WTO

Source: Dicken , Peter (2015), Global Shift (7th Ed.)

A process that is not new

11

The link between trade and wealth, and

between trade and innovation, is a very old
one:

Caral (in todays Peru) is 5 thousand years old;

Phoenicians, Romans,...
over the last 500 years: Portugal, Spain, The
Netherlands, UK

The most developed economies are not

today more open than before World War I;

Even international capital flows are not

much higher today than 100 years ago:

even though they span a wider range of

countries and industries.

 but with important differences!

12

All past globalization processes were based on

trade liberalization.
Today, the globalization of production is just as
important as the globalization of markets:

expansion of industrialisation to new areas:

Far East, Central and Eastern Europe, Latin America.

the role of FDI

after the 1980s but even more so in the second half of the 90s;
deepening the processes of economic integration (EU, NAFTA);

Strong growth in intra-industrial trade:

Value chains increasingly cross countries and continents;

Huge growth of international trade in services:

the concept of non-tradable sectors is questioned.

Main world merchandise exporters and

importers, 2011
13

Source: Peter Dicken (2015), Global Shift, (7th Ed.)

Leading exporters merchandise trade, 2013

(billion USD/%)
Ran
k
1
2
3
4
5
6
7
8
9

10

Valu Shar
e
e
China
2209 11,7
United States
1580 8,4
Germany
1453 7,7
Japan
715 3,8
Netherlands
672 3,6
France
580 3,1
Korea, Republic of 560 3,0
United Kingdom
542 2,9
Hong Kong, China 536 2,8
domestic exports
20 0,1
re-exports
516 2,7
Russian
523 2,8
Federation
Exporters

3,9% in 2000 (rank 7)

12,3% in 2000 (rank 1)
8,7% in 2000 (rank 2)

Source: WTO, International Trade Statistics, 2014

Excluding intra-EU28 trade

Ran
Exporters
k
1
Extra-EU (28)
2
China
3
United States
4
Japan
Korea, Republic
5
of
Hong Kong,
6
China
domestic

exports
0
re-exports
Russian
7
Federation
8
Canada
9
Singapore

Valu Shar
e
e
2307 15,3
2209 14,7
1580 10,5
715 4,8
560

3,7

536

3,6

20

0,1

516

3,4

523

3,5

458
410

3,0
2,7

Leading importers merchandise trade, 2013

(billion USD/%)
Ran
Importers
k
1
United States
2
China
3
Germany
4
Japan
5
France
6
United Kingdom
7
Hong Kong, China

retained imports
8
Netherlands
9
Korea, Republic of
10 Italy

Value Share
2329
1950
1189
833
681
655
622
141
590
516
477

12,3
10,3
6,3
4,4
3,6
3,5
3,3
0,7
3,1
2,7
2,5

18,9% in 2000 (rank 1)

3,4% in 2000 (rank 8)
7,5% in 2000 (rank 2)

Source: WTO, International Trade Statistics, 2014

Excluding intra-EU28 trade

Ran
Importers
k
1
United States
2
Extra-EU (28)
3
China
4
Japan
5
Hong Kong, China
6
7
8
9
10

Value Share
2329
2235
1950
833
622

15,4
14,8
12,9
5,5
4,1

retained imports

141

0,9

Korea, Republic of
Canada a
India
Mexico
Singapore

516
474
466
391
373

3,4
3,1
3,1
2,6
2,5

retained imports

182

1,2

The pattern of merchandise trade surpluses and

deficits, 2011
16

Source: Peter Dicken (2015), Global Shift, (7th Ed.)

Merchandise exports by region (several years)

(% of total world merchandise exports)

Asia
Middle East

1948
1953
1963
1973
1983
1993
2003
2013

Africa
Commonwealth of Independent States
Europe
South and Central America
North America
0.0

20.0

40.0

Source: WTO, International Trade Statistics, 2014

60.0

Merchandise imports by region (several years)

(% of total world merchandise imports)

Asia
Middle East

1948
1953
1963
1973
1983
1993
2003
2013

Africa
Commonwealth of Independent States
Europe
South and Central America
North America
0.0

20.0

40.0

Source: WTO, International Trade Statistics, 2014

60.0

19

The geography of world trade: large share of

intra-regional trade

Source: Peter Dicken (2015), Global Shift, (7th Ed.), calculated from WTO,
2012

The geography of international trade: intra and inter-regional

trade (Share of regional trade flows in each region's total
merchandise exports), 2013

North
America
South and
Central
America
Europe
Commonwe
alth of
Independen
t States
(CIS)
Africa
Middle East
Asia
World

North South and

Ameri Central Europe
ca
America

CIS Africa

Middle
World
Asia
East

49,2

8,9

15,2

0,8

1,7

3,2

20,7 100,0

24,2

26,6

16,4

1,2

2,7

2,5

24,1 100,0

7,6

1,9

68,6

3,8

3,3

3,3

10,0 100,0

4,2

1,2

52,2

19,1

1,7

2,5

17,8 100,0

8,9
8,2
17,5
16,8

4,9
0,8
3,3
4,3

35,8
10,6
14,8
36,4

0,3
0,5
2,2
3,1

16,2
2,8
3,3
3,4

3,0
10,1
4,7
4,2

Source: WTO, International Trade Statistics 2014.

26,6
52,2
53,3
29,6

100,0
100,0
100,0
100,0

Shares of North-North, North-South and South-South

trade in world merchandise exports, 1990-2011 (%)

Source: WTO, World Trade Report 2013, p.65

Product shares in world merchandise exports

since 1900 (%)

Source: WTO, World Trade Report 2013, p.54

Sectoral distribution of world exports, 2013

80% of world
exports

52% of world
exports;
65% of world
merchandise exports

Source: WTO, International Trade Statistics 2014

Global trade in services (exports and imports) and the

pattern of services trade surpluses and deficits, 2011
24

Source: Peter Dicken (2015), Global Shift (7th Edition)

Exports of services, by category (%)

2013
2012
Transportation
services
Travel
Other commercial
services

2011
2005
2000
0.0

20.0

40.0

60.0

Source: WTO International Trade Statistics 2014

Leading exporters - services, 2013

(billion USD/%)

Rank
1
2
3
4
5
6
7
8
9
10

Exporters
United States
United Kingdom
Germany
France
China
India
Netherlands
Japan
Spain
Hong Kong, China

Value
662
293
286
236
205
151
147
145
145
133

Shar
e
14,3
6,3
6,2
5,1
4,4
3,2
3,2
3,1
3,1
2,9

Excluding intra-EU28 trade

Rank Exporters
Extra-EU (28)
1
exports
2
United States
3
China
4
India
5
Japan
6
Hong Kong, China
7
Singapore a
8
Korea, Republic of
9
Switzerland
10 Canada

Source: WTO, International Trade Statistics 2014

Shar
Value
e
891 25,2
662 18,7
205 5,8
151 4,3
145 4,1
133 3,8
122 3,5
112 3,2
93 2,6
78 2,2

Leading importers - services, 2013

(billion USD/%)
Ran
k
1
2
3
4
5
6
7
8
9

Valu Shar
Importers
e
e
United States
432 9,8
China
329 7,5
Germany
317 7,2
France
189 4,3
United Kingdom 174 4,0
Japan
162 3,7
Singapore
128 2,9
Netherlands
127 2,9
India
125 2,8
Russian
10 Federation
123 2,8

Excluding intra-EU28 trade

Ran
Valu Shar
k Importers
e
e
Extra-EU (28)
1 imports
668 19,7
2 United States
432 12,7
3 China
329 9,7
4 Japan
162 4,8
5 Singapore
128 3,8
6 India
125 3,7
Russian
7 Federation
123 3,6
8 Korea, Republic of 106 3,1
9 Canada
105 3,1
Source: WTO, International Trade Statistics 2014
10 Brazil
83 2,5

Exports of services by region, 2012

(% of total world exports of services)

Source: WTO, World Trade Report 2013

Imports of services by region , 2012

(% of total world imports of services)

Source: WTO, World Trade Report 2013

The global map of FDI, 2012

30

Source: Peter Dicken (2015) Global Shift (7th Edition), calculated

from UNCTAD, 2013

FDI inflows: global and by country group

1995-2014 (billion USD)
31

Source: UNCTAD, World Investment Report 2015: p.2

FDI ouflows: Share of FDI outflows by group of

economies, 19992013 (Per cent)
32

Source: UNCTAD, World Investment Report 2014: p.6

Multinational firms: some figures

33

1990
Multinational firms

Subsidiaries

37 000

170 000

2010

Obs.

103 000

70% based in
developed
countries

885 000

58% located in
developing
countries

Source: UNCTAD, World Investment Report 2011

In 2014, foreign subsidiaries account for

(UNCTAD, WIR 2015, p.18):

Employment: about 75 million people (in 1990:

21 million);
GDP: about one tenth of world GDP;
Trade: about one third of world exports;

The largest multinationals

34

The 100 largest multinationals

account for:

9,3% of Foreign assets owned by MNEs;

21% of Foreign affiliates sales;

14,4% of Employment in foreign affiliates

Source: UNCTAD, World Investment Report 2013, p.23.

The worlds largest non-financial

MNCs, by foreign assets, 2012

Source: World Investment Report, 2013

35

Ranking
1
2
3
4
5
6
7
8

Corporation

Home
economy

General Electric Co
United States
Royal Dutch Shell plc
UK
BP plc
UK
Toyota Motor
Japan
Corporation
Total SA
France
Exxon Mobil Corporation United States
Vodafone Group Plc
UK
GDF Suez
France

Industry
Electrical & electronic equip.
Petroleum expl./ref./distr.
Petroleum expl./ref./distr.
Motor vehicles

9
10
11
12
13
14

Chevron Corporation
Volkswagen Group
Eni SpA
Nestl SA
Enel SpA
E.ON AG

United States
Germany
Italy
Switzerland
Italy
Germany

15

Anheuser-Busch InBev
NV
ArcelorMittal
Siemens AG
Honda Motor Co Ltd

Belgium

Petroleum expl./ref./distr.
Petroleum expl./ref./distr.
Telecommunications
Utilities (Electricity, gas and
water)
Petroleum expl./ref./distr.
Motor vehicles
Petroleum expl./ref./distr.
Food, beverages and tobacco
Electricity, gas and water
Utilities (Electricity, gas and
water)
Food, beverages and tobacco

Luxembourg
Germany
Japan

Metal and metal products

Electrical & electronic equip.
Motor vehicles

16
17
18

The largest economic entities

Source: Global Trends - Corporate Clout: The Influence of the

Worlds Largest 100 Economic Entities
36

Of the top 100 economic entities, 44 are companies

Changes in the global economic map:

production, trade and FDI
Developing countries increasing
shares of production, trade and
foreign direct investment (Dicken,
2015, p.25)

Although developed countries

continue to dominate, their position
37