International Economics PowerPoint Presentation

International Economics PowerPoint Presentation

2016-03-10 43K 43 0 0

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Lecture 12: Trade Policy – . The Developing World. Overview. Exports and imports. International trade theory: Criticisms. International trade: Initial conclusions for developing economies. Import substitution v. Export promotion. ID: 249493

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Presentations text content in International Economics

Slide1

International Economics

Lecture 12: Trade Policy –

The Developing World

Slide2

Overview

Exports and imports

International trade theory: Criticisms

International trade: Initial conclusions for developing economies

Import substitution v. Export promotion

Exchange rates

Economic integration

International trade reform

Slide3

Exports and imports

Export dependence:

Oil producing states

Primary products – up to 25% of export earnings!

Long-term prices of primary products are going down…

Slide4

Primary product prices going down

Slide5

Primary product prices going down

Slide6

Exports and imports

Low income elasticity of demand for primary products

Price elasticity of demand for primary products is usually inelastic

Price volatility

Combination of two effects =

export earnings instability

What about manufactured goods?

Slide7

Exports and imports

Import dependence

K, components, raw materials

Balance of payment problems

Cultural imperialism v. ideas

A reminder:

terms of trade

P

X

/ P

M

: Prices of average imports relative to average exports

Slide8

Exports and imports

Prebisch-Singer Thesis

Not only is there a long-term decline in commodity prices…

But there is also a long term decline in commodity prices

relative

to the prices of manufactured goods

Thesis based on differences in income elasticity of demand for commodities v. manufactured goods

Slide9

Exports and imports

Prebisch

-Singer Thesis (cont.)

Attempted response?

Import substitution

industrialisation

Diversification into manufacturing

But also:

Basic

v. advanced manufactured goods

Slide10

International trade theory: Criticisms

Immobility of factors of production

Resource

underutilisation

-> easy export growth?

Technology substitution

Consumer sovereignty

Slow intrastate factor mobility

International market power

Slide11

International trade theory: Criticisms

Uncertainty

Government intervention

Protection

Industrial policy

Foreign ownership

Slide12

International trade: Initial conclusions for developing economies

Some preliminary conclusions:

Central role for international trade

Income inequality issues

Gains from trade sometimes limited

Source of capital

Collective self-reliance

Slide13

Import substitution v Export promotion

Import substitution

Pre-90s

Requires strong protection

Growth from domestic market

Diversification

Government intervention

Slide14

Import substitution v Export promotion

Import substitution - Problems:

Infant industry ‘never grows up’

Inefficient allocation of resources

Income inequality

Overvalued exchange rates

Slide15

Import substitution v Export promotion

Export promotion

Internationally competitive – if successful!

Used by the four tigers?

Primary export expansion?

Manufacturing export expansion?

Slide16

Import substitution v Export promotion

Industrialisation

strategy approach

A role for industrial policy

Import substitution

then

Export promotion?

Technology transfer

FDI, joint ventures

Non-preferential but active support for exporters

Industry-specific infrastructure, human capital

Slide17

Exchange rates

Overvaluation

Options:

Run down reserves / borrow foreign exchange

Reduce D (protection)

Exchange controls

Devalue currency!

China…

Slide18

Exchange rates

Dual/parallel exchange rates

Declared rate (critical imports)

Undeclared rate (luxury imports)

Corruption!

Free-floating exchange rates

Prone to price volatility, speculation

Managed floating exchange rate

Slide19

Economic integration

Free trade area

Customs union

Common market

Monetary union

Why?

Division of

labour

, economies of scale

Economic benefits v political sovereignty

Convergence / divergence

Slide20

International trade reform

Prospects for developing countries heavily dependent on developed countries

Regional integration an obstacle?

Lowering of tariffs and non-tariff barriers

Extensive margin v. intensive margin

Compensation/assistance for displaced workers?

Floating exchange rates – China!

Slide21

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Slide24


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