ch 2

world trade in goods and services exceeded ____ trillion in 2015

$21 trillion

what was the US trade deficit in goods and services in 2019?

$577B

volume of trade (imports + exports) between US and china, canada, and mexico each exceeded ______ in 2018

$600B

what was the US trade deficit in goods in 2019?

$864B

other things besides size that matter for trade

- *distance*: between markets influences transportation costs and therefore the cost of imports and exports - *cultural affinity*: close cultural ties, such as common language, usually lead to strong economic ties - *geography*: ocean harbors and lack of mountain barriers make transportation and trade easier - *multinational corporations*: corporations spread across different nations import and export many goods between their divisions - *borders*: crossing borders involves formalities that take time, often different currencies need to be exchanged, and perhaps monetary costs like tariffs reduce trade

trade agreements between countries are intended to reduce...

- *formalities* and - *tariffs* needed to cross borders - and therefore *increase trade*

before 2008-2009, world GDP tended to grow around __-__% and world merchandise trade around __-__%

- 3-4% - 6-8%

NAFTA

- US signed a free trade agreement with mexico and canada in 1994 - because of NAFTA and because mexico and canada are close to the US, the amount of trade between them as a fraction of GDP is larger than between the US and european economies - US does markedly more trade with its neighbors than it does with EU economies of the same size

what will COVID do to world trade?

- WTO thinks world merch trade will plummet by around 13-32% in 2020 - recovery in trade expected in 2021, but depends on duration of outbreak and effectiveness of policy responses

in the past, a large fraction of the volume of trade came from ______________ and _________ products

- agricultural - mineral

who were the 5 largest trading partners with the US in 2015?

- china - canada - mexico - japan - germany

besides distance, borders increase the _____ and _____ needed to trade

- cost - time

US runs trade ________ in goods with most of its major trading partners

- deficit - meaning they import more than export in value - has largest deficit with *china*

in 2012, 3 of the top 10 trading partners with the US were also the 3 largest european economies: _________, _____, and _______

- germany - UK - france

the great recession shrunk US ________ by more than US ________ so trade deficit shrunk in 2009

- imports - exports

the size of an economy is directly related to the volume of ________ and ________

- imports - exports - larger economies *produce more goods and services*, so they have *more to sell in the export market* - larger economies *generate more income* from goods and services sold, so they are *able to buy more imports*

service outsourcing *(is not / is)* currently a significant part of trade

- is not - some jobs are tradable and thus have the potential to be outsourced - but *most jobs (60%) need to be done close to the customer*, making them *non tradable*

the US highest trade volume was in _______ and ________ in 2019, not china as normal because of trade dispute or COVID hitting them first

- mexico - canada

service outsourcing

- occurs when a firm that provides services moves its operations to a foreign location - service outsourcing can occur for services that can be transmitted electronically

the negative effect of distance on trade according to the gravity models is significant, but has grown *(larger / smaller)* over time due to....

- smaller - modern transportation and communication

why does the US trade more with the largest european economies than others?

- these countries (germany, UK, and france), have the *largest GDP* (the value of goods and services produced in an economy) in europe - each european country's share of US trade with europe is *roughly equal to its share of european GDP*

technologies that have increased trade

- wheels - sails - compasses - railroads - airplanes - internet - gps satellites

when does a country run a trade deficit?

- when *imports exceed exports* - the trade balance is *negative*

a 1% increase in the distance between countries is associated with a decrease in the volume of trade of _____-___%

0.7-1%

mineral products like petroleum, coal, copper, remain an important part of world trade at ____%

12%

estimates indicate that the Us-Canadian border deters trade as much as if the countries were ______-______ miles apart

1500-2500

US trade was basically balanced until ______

1976

US trade ran moderate deficits in _____-_____

1977-1997

US trade ran large deficits in _____-_____

1998-2008

when did world GDP and trade rebound after the contraction in 2008-2009?

2010

services such as shipping, insurance, legal fees, and spending by tourists account for about ____% of the volume of trade

24%

the largest 15 trading partners with the US accounted for ___% of the value of US trade in 2015

75%

agricultural products are a relatively small part of trade at ___%

8%

more than ____% of exports from china are manufactured goods

90%

gravity model assumes that size and distance are important for trade in the following way

Tij = (A x Yi x Yj) / Dij - A is a constant - Tij is the value of trade between country i and j - Yi is the GDP of country i, Yj is the GDP of country j - Dij is the distance between country i and j

data shows that there is much more trade between pairs of canadian provinces than between canadian provinces and ___ _______, even when holding distance constant

US states

the US ran a trade ________ in goods and services in 2019

deficit of -$577B

vertical *(integration / disintegration)* of production has contributed to the rise in the value of world trade through extensive cross-shipping of components

disintegration

US exports and imports were *(up / down)* overall in goods and services in 2019

down

why did world GDP and trade contract sharply in 2009?

due to the great recession

trade balance =

exports - imports

political factors such as wars can change trade patterns much more than...

innovations in transportation and communication

trade between any two countries is larger, the *(larger / smaller)* is either country

larger

most (57%) of the volume of trade today is in...

manufactured products like cars, computers, and clothes

over the past 50 years, the exports of developing countries have shifted toward...

manufactures

what percentage of world output is sold across national borders?

more than 30%

since 2010, growth in world trade has been *(fast / slow)* relative to historical averages

slow