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Samenvatting "international economics", met handboek, 3e bach
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dit is een samenvatting gemaakt aan de hand van het handboek en de powerpoints gegeven in de les.
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Global Political Economy reading notes lecture 1-6
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Summary Lectures Trade & Finance in the Gloabl Economy
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International Economics2022 – 2023
1
,Session 1: Introduction and absolute advantage theory
1 3 Realms (domeinen) of the world economy
Trade:
Trade is the import and export (exchange) of products and services from one country to other countries
(related to globalization and welfare)
o Goods: tangible and storable (merchandise)
o Services: intangible and non-storable (=1/4th of the total global trade)
Global exports has risen dependency on global trade
o Why is there a surge in global trade?
Transportation costs
container revolution (uniform sizes more on 1 ship = lower costs) and air
transport
Technology
mainly information and communication tech)
Tariffs
tariffs were lowered from average about 20% to 5% in the 1990s
Gross domestic product (GDP) is a measure of world output.
Production
Production of a product in multiple countries
Production has something to do with trade (when you trade product and services you can decide, I can
lower my cost by delivering those products by establishing an office abroad and dealing with international
production) , deals with multi national enterprises and there investments in there production networks.
Companies who operate in more than one company they put money in plant and machinery in foreign
companies (is it wise to set up a production plant, what are the transaction costs of doing that, is it maybe
better to have a joint venture instead of having your own plant, government question, should I entry this
company or not?
Contracts = low-commitment, low-control
FDI = high-commitment, high-control
Finance:
Finance: most important now a days, the capital flow from money from one to other countries have
emerged, the biggest chunk of flows are flows in finance bonds, investments,…
2
,2 Realm 1: What is international trade?
The exchange of goods (merchandise) and services among the countries of the world.
o It means that goods or services cross the borderlines
Goods: tangible and storable (something you can drop on your toe).
Services: intangible and non-storable (something you cannot drop on your toe).
Trade in services accounts for approximately one quarter of global trade.
2.1 What is the relation between empires and international trade?
2.1.1 Phase 1: regional empire building
War and occupation is very expensive and the only way to earn back the investment of war is by
exploitation and the gains of trade facilitation.
The problem of exploitation is that you can only plunder resources once and it increases resistance
(occupation costs).
Romans facilitated trade by:
o building roads and cities
o legal system that protected basic property rights
o safety from piracy and local conflict
The first economics theories were about economic trade
Why so important?
o These are different ways to become rich
You can encounter someone else’s territory
Problems: it takes a long time to rebuilt the city & costly
o Alternative: you have to control an area where people have to trade more convenient because
you have a more stable income (taxes on trade)
You can pass this play, but you have to pay for it
People who trade together have more value
o People start to trade and create value un addition to what they already have
o People who trade together create more value than people who trade individual easier to pay
taxes then
Easier to build an empire if it is possible to trade in empires empire creates value?
Purchasers had to pay taxes
3
, 2.2 What is the relation between war and international trade?
2.2.1 Phase 2: Maritime empires
As we will later see, the gains of international trade are larger when the resource endowments of
countries are more different.
The Portuguese were the first to understand this and they invented the global trade empire through
maritime connections.
The Napoleontic wars was a war of dominance between a perfected regional empire vision (France)
versus a perfected maritime empire vision (British empire).
However, the maritime empires had a tendency to exclude other countries from outside the empire from
intra-empire trade, leading to increased tensions with the non-maritime empires (Germany, Japan, Italy,
Austria).
The only way for a regional empire to increase the gains of trade is by expanding the borders of the
empire, leading to geopolitical tensions and ultimately war.
After two devastating world wars, the world was finally ready to break this cycle of war.
This also made the maritime (colonial) empires redundant.
Paradox of trade: the more different you are, the wealthier the trade
This explained why Napoleon was meant to fail
o Napoleon: only focused on European countries
He wasn’t an economic genius
o English: a more global empire by the maritime specialists & combined Portugal with Brazil etc.
o They combined different parts of the continent
o They understood that you don’t need to occupy a whole country but just a trade part
Global empires much more diversity that’s what made them so strong
2.3 GATT WTO
2.3.1 First the GATT
Previuous slides = origin of the GATT
GATT = general agreement of tarrifs and trade
4
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