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what is international economics
not about countries, but about the interactions between countries
how much land does the world economy exist of
about 15 times the US
why is US unusual- richness
we have 5% of the population, but more than 20% of the world income
what is world GDP and per capita
GDP= 40 trillion
per capita= 9 thousand
what is US GDP and per capita
GDP= 12 trillion
per capita= 40 thousand
gross domestic product
is US free? give 2 reasons why or why not.
we dropped to #10 on the scale for economic freedom. this is due to increased govt spending and increased barriers to trade and investment
Eiras reading regarding freeness... "No Longer a Champion of Economic Freedom"- why is US falling behind
1)expansion of expensive entitlement programs
2)not freeing markets fast enough/ economic openess not keeping up
3)increased govt spending
Eiras (Loss of Economic Freedom) regarding net flow of FDI
FDI has decreased sharply; this can cause price to fall, less opportunities, less foreigners to invest, our leadership and power to decline
Eiras(Loss of economic freedom) on govt spending
includes unemployment compensation, education spending, health programs, agricult subsidies
Eiras on how to fix lower economic freedom (5)
1)better trade policy- duty free, no non-tariff barriers
2)help fiscal burden- better tax regimes
3)fewer restrictions for FDI and capital flows
4)less regulations in labor laws, environmental/zoning
5) make informal market (black market) smaller
Eiras on how Bush can help increase economic freedom
cut expenditures, balance federal budget, eliminate barriers, support free trade
Eiras: How is "economic freedom" defined? How does the Heritage Foundation measure it?
EF: foundation for US strength. Measured by Index of Economic Freedom. There are 10 sectors ranked 1-5.
Eiras:Is it inward FDI or outward FDI that the author regards a desirable effect of economic freedom, and why?
inward FDI
Eiras: What reasons are given for the fall of the US in the economic freedom rankings?
expenditure spending, barriers, expansive entitlement programs are given more priority
How do countries interact economically?
through capital flows- includes financial (holdings of assets abroad) and Real (international ownership)
who trades the most?
EU-15, US, China, Japan, Canada (decreasing order). Developed countries are biggest traders. China is catching up though in trade volume
who trades with whom?
rich countries tend to trade more. N.A., Europe, Asia tend to trade with each other. Latin Am and AFrica (poor) trade mostly with rich

rich AND poor trade mostly with RICH
What is the biggest traded category of world trade
what is the fastest growing category of world trade
mining-- of oil and such
What does US export/import?
exports agri, imports oil
what was the fastest growing category of world trade from 00-04?
minerals and ores
whats the fastest growing category of trade today??
prob fuels, because this is the VALUE of trade and oil prices have been rising drastically
What percent of all trade is automotive?
fastest growing lately of merchandise exports
iron and steel and chemicals
does US import or export more
import more
what is the US a big importer or exporter of
export agricult, import oil, export AND import capital goods (machines for making things)
US's trade and GDP

What is the exception to this
US exports a lot, but it is a smaller part of GDP than other countries

exception: Singapore and Nepal
Whats significant about Singapore's GDP and trading
Singapore's exports can be more than GDP. This is because their exports are made with imports.
What is included in Financial capital flows
currency, bank deposits, bonds, stocks, bank loans
What is included in Real capital flows
real estate, capital assets (plants and equip), sotcks if ownership is large
In terms of capital flows, how is the US
we owe more than we own of assets! we are a large net debtor (we spend more than we earn). some of this is govt but a lot if private
How do countries interact economically
migration (temp and perm workers), direct and indirect policies
what are direct policies? (5)
trade policies, foreign aid, capital controls, exchange rate management, immigration restrictions
Hufbaurer and Grieco- Payoff from globalization

what are the efects of globalization?
increased US income and better economic growth
Hufbaurer and Grieco- Payoff from globalization

how to globalize (4)
expansion of intl trade (inc GDP),
lower tariffs (stimulates productivity, inc product choices),
general equilibrium (inc GDP),
productivity benefits
Hufbaurer and Grieco- Payoff from globalization

By how much have US tariffs fallen over 60 years? By how much have incomes risen due to reduced costs of trade?
40%, incomes risen by 1 trillion, 10000 a household
Hufbaurer and Grieco- Payoff from globalization

With tariffs now low, is their scope for any further liberalization? Why?
yes, other sectors that havent been affected will be affected (agricul, developin countries, services, transport)
Hufbaurer and Grieco- Payoff from globalization

Who loses from liberalization, how, and how much?
personal losses are encountered. people who lose jobs... but this is only a small cost compared to benefits of increased income. those who compete with imports will have serious losses
Center for Global Development

what percent of exports go to developing countries, and how high are tariffs
45%, tariffs are higher for developing than developed esp. agri, textiles, footwear. we also tariff processed goods, this decreases profit on manufactured (higher value) goods
Center for Global Development

How important is trade for the United States, and especially its trade with developing countries?
1/3 exports go there, 1/3 imports come from them
Center for Global Development

Did NAFTA help the people in Mexico?
yes, increased exports and FDI. Created jobs and inc personal income
Center for Global Development

Do US tariffs cause greater harm in other rich countries or in poor ones?
poor countries. they are higher in poor. impose taxes on processed goods and we also subsidize things
Center for Global Development

Who gets more from rich country governments: rich country farmers or poor countries?
rich country farmers. 80% of help goes to top 10%. Majority go to agribusinesses, despite 90% are small farmers
Examples of indirect policies
subsidies of agri, macro policies (monetary, fiscal), environmental policies, standards
International Monetary Fund
World Trade Organization
Organization for Economic Cooperation and Development
What does IMF do?
give financial assistance, lends money to countries
What does World Bank do?
gives development assistance, helps poor countries be less poor; economically not financially
When was WTO established?
What does WTO do?
trade policy regulation and negotiation of int'l trade policies/tariffs
What are "Beggar Thy Neighbor Policies"? and name 2
hleping yourself at the expense of others-- high tariffs and competitive devaluations
what are high tariffs?
tax on imports
what are compeitive devaluations
lowering the value of money
state of economy before WW2
we taxed them they taxed us. slowed the world economy and made the depression worse
state of economy after ww2
end of depression, ww2 created demand for guns, etc.
what happened at Bretton Woods?
3 institutions were created
World Bank
ITO (International Trade Org)- however, this was never ratified by our congress and the GATT was created in place of this.
GATT, define it.
General Agreement of Tariffs and Trade. interim agreement to govern trade until ITO is ratified. this was around for 50 yrs.
What changes have happened since 1940 to the IMF?
instead of being pegged to an exchange rate, they switched to floating exchange rate

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