SESSION 1 â€“ INTRODUCTION
Trade is what happens between nations (which can be big, small or even city state just like singapore), it could also be sending labour forces or capital from a country to another (old fashion way)
The international integration of national economies have brought many benefits to nations accross the globe, including technologal innovation, less expensive products, and greater investment in regions where local capital is scare, to name a few. But it also made countries vulnerable to economic problems that have become more easily transmitted from one place to another.
ELEMENTS OF INTERNATIONAL ECONOMIC INTEGRATION
Most people ...view middle of the document...
Obliged to close their borders to foreign goods, capital and people. And since the end of WWII, many of the economic linkages bewteen nations have served to repair the damage done.
Economists usually point out three criteria/measures for judging the degree integrationÂ :
the similarity of prices in seperate markets
One measure of the importance of international trade in a nation's economy is the sum of exports plus imports, divided by the Gross Domestic Product, where GDP is a measure of total production (specifiaclly the value of all finals goods and services produced inside a nation during some period, usually one year).
The ratio of trade to GDP is called the INDEX OF OPENNESS
In general large countryies are less dependent on international trade because their firms can reach an optimal production size without having to see to foreign markets. Consequently smaller countries tend to have higer measures of openness.
The index of openness measures the relative importance of international trade in a nation's economy, but it does not provide any information about trade policy or trade barriers.
In addition to exports and imports, factor movements are also an indicator of economic integration. (when talking about factors of productionÂ : labour and capital)
As national economies become more interdependent, labor and capital should move easily across international boundaries.
Labor, however, is less mobile internationally than it was in 1900 (due to passport controls and work permits)
â†’ Consider, 1890, 14,5% of the US pop was foreign born, while in 2001 it represents 12,1%.
On the capital side, measurement is more difficult, since there are several way to measure capital flows. There is a basic disctinction bewteenÂ :
financial capital=paper assets such as stocks, bonds, currencies and bank accounts
physical capital= real estate, factorues and businesses
The latter type of capital is called Foreign Direct Investment (FDI)
FDI are linked with the end of protectionism for some countries that's why they developed themselves in the 80's.
Indeed bewteen 1913-2003, there were several protectionism differences. In the early 1913 there started to be less of protectionism policies.
Instruments to trade policyÂ : barriers to trade (tariffs), taxes on imports, quotas, limitations on imports.
Flow are much larger than the previous era of globalization but mainly because economies are larger.
Increasing in capital flows are due toÂ :
many more financial instruments available
role of foreign exchange transactions (largest component of international capital movements)
costs of foreign financial transactions have fallen significantly
BUT can lead to speculative excesses and overinvestment which can lead to disastreous consequences.
THREE FEATURES OF CONTEMPORARY INTERNATIONAL ECONOMIC RELATIONS
Trade, as measured by the openness index, is about 50% more important...