IE 1 - Free Trade

Trade balance =

Exports – Imports

World exports =

World Imports

Value Added is

value created by transforming inputs (material & Labor) into final product

Sales - intermediary goods & services

Trade as % of GDP =

(X +M)/(2*GDP)

or

(X-M)/GDP

Trade openness =

(X+M)/GDP

Free Trade Areas vs Customs Union

no trade barriers
vs.
no trade barriers + identical tariffs against rest of world (EU)

What is globalisation?

↗ trade between countries in:

Goods and Services

Migration

Capital Mobility

three world areas that trade the most with each other?

Europe, North America and China plus the rest of Asia

Which world regions mainly export manufacturing, which food items, which fuels and which ores, metals etc.?

manufacturing goods are North America, Europe and southern Asia;

food items are mainly exported by South America and Africa;

fuels, ores and metals are mainly exported by South America, the Middle East, Russia and Africa.

Explain account deficit? + highest current account deficit in the world?

M>X

US

What are the two main reasons trade has expanded so much aIer World War II?

• lower transportation costs through technological innovation (combustion engine & flight)

• Lower tariffs