The International Economy

International economics is growing in importance as a field of study because of the rapid integration of international economic markets. More and more, businesses, consumers and governments realize that their lives are increasingly affected, not just by what goes on in their own town, state or country, but by what is happening around the world. Consumers can buy goods and services from all over the world in their local shops. Local businesses must compete with these foreign products. However, these same businesses also have new opportunities to expand their markets by selling in a multitude of other countries. The advance of telecommunications is rapidly reducing the cost of providing services internationally and the internet will assuredly change the nature of many products and services as it expands markets even further than today. Markets have been going global, and everyone known it.

One simple way to see this is to look at the growth of exports in the world during the past 50+ years. The following figure show overall annual exports measured in billions of US dollars from 1948 to 2005. Recognizing that one country’s exports are another country’s imports, one can see the exponential growth in trade during the past 50 years.

However, rapid growth in the value of exports does not necessarily indicate that trade is becoming more importance. Instead, one needs to look at the share of traded goods in relation to the size of the world economy. The adjoining figure show world exports as a percentage of world GDP for the years 1970 to 2005. It shows a steady increase in trade as a share of the size of the world economy. World exports grew from just over 10% of the GDP in 1970 to almost 30% by 2005. Thus, trade is not only rising rapidly in absolute terms, it is becoming relatively more important too.

One other indicator of world interconnectedness can be seen in changes in the amount of foreign direct investment (FDI). FDI is foreign economic influence can affect a country. The adjoining figure shows the stock, or the sum total value, of FDI around the world taken as a percentage of world GDP between 1980 and 2004. It gives an indication of the importance of foreign ownership and influence around the world. As can be seen, the share of FDI has grown dramatically from around 5% of world GDP in 1980 to over 20% of GDP just 25 years.

The growth of international trade and investment has been stimulated partly by the steady decline of trade barriers since the Great Depressions of the 1930s. in the post World War II era the general agreement on tariffs and trade, or GATT, was an agreement that prompted regular negotiations among a growing body of members to reduces tariffs (import taxes) on imported goods one reciprocal basis. During each of these regular negotiations, (eight of these rounds were completed between 1948 and 1994), countries promised to reduce their tariffs on imports in exchange for concessions or tariffs reductions, by other GATT members. When the most recent completed round was finished in 1994, the member countries succeeded in extending the agreement to include liberalization promises in a much large sphere of influence. Now countries would not only lower tariffs on goods trade, but would begin to liberalize agriculture and service market. They would eliminate the many quota systems- like the multi- fiber agreement in clothing-that had sprouted up in previous decades. And they would agree to adhere to certain minimum standards to protect intellectual property rights such as patent, trademarks and copyrights. The WTO was created to manage this system of new agreements, to provides a forum for regular discussion of trade matters and to implement a well- defined process for settling trade disputes that might among countries.

As of 2006, 149 countries were members of the WTO “trade liberalization club” and many more countries were still negotiating entry. As the club grows to include more members, and if the latest round of trade liberalization discussion called the doha round concludes with an agreement, world markets will become increasingly open to trade and investment. (note : the Doha round of discussions was begun in 2001 and remains uncompleted as of 2006)

Another international push for trade liberalization has come in the form of regional free trade agreements. Over 200 regional trade agreements around the world have been notified, or announced, to the WTO. Many countries have negotiated these with neighboring countries or major trading partners, to promote even faster trade liberalization under the GATT/WTO,. In part it as occurred because countries have wished to promote interdependence and connectedness with important economic or strategic trade partners. In any case, the phenomenon server to open international markets even further than achieved in the WTO.

These changes economic patterns and the trend towards ever increasing openness are an important aspect of the more exhaustive phenomenon known as globalization. Globalization more formally refers to the economic, social culture or environmental changes that end to interconnect peoples around the world. Since the economic aspects of globalization are certainly one of the most pervasive of these changes, it is increasingly important to understand the implications of the global marketplace on consumers, businesses and governments. That is where the study of international economics begins.

What is international Economics?

International economics is a field of study which assesses the implications of international trade in goods and services and international investment.

There are two broad sub-fields within international economics: international trade and international finance.

International trade is a field in economics that applies microeconomic models to help understand the international economy. Its content include the same tools that are introduce in microeconomics course, including supply and demand analysis, firm and consumer behavior, perfectly competitive, oligopolistic and monopolistic market structure, and the effects of market distortions. The typical course describes economic relationships between consumers, firm, factor owners, and the government.

The objective of an international trade course is to understand the effects on individuals and businesses because of international trade itself, because of change in trade policies and due to changes in order economic conditions. The course will develop argument that support a free trade policy as ell as argument that support various types of protectionist policies. By the end of the course, student should better understand the centuries-old controversy between free trade and protectionism.

International finance applies macroeconomics models to help understanding the international economy, its focus is on the interrelationships between aggregate economic variables such its GDP, unemployment rates, inflation rates, trade balances, exchange rate, interest rates, etc. this field expands macroeconomics to include international exchanges. Its focus is on the significance of trade imbalance, the determinants of exchange rate and the aggregate effect of government monetary and fiscal policies. Among the most important issues addressed are the pros ad cons fixed versus floating some trade terminology.

In trade policy discussions term such as protectionism, free trade, and trade liberalization are used repeatedly. It is worthwhile to define these term at the beginning. One other term is commonly used in the analysis of trade models namely national autarky, or just autarky.

Two extreme states or conditions could potentially be created by national government policies. At one extreme, a government could purse a “laissez faire” policy with respect to trade and thus impose no regulation whatsoever that would impede (or encourage) the free voluntary exchange of goods between nations. We define this condition as free trade.

At the other extreme, a government could impose such restrictive regulations on trade as to eliminate all incentive for international trade. We define this condition in which no international trade occurs as national autarky. Autarky represents a state of isolationism.

Probably, a pure state of free trade or autarky has never existed in the real world. All nations impose some from of trade policies. And probably no government has ever had such complete control over economic activity as to eliminate cross-border trade entirely. The real, world, instead, consist, of countries that fall somewhere between these two extremes. Some countries, such as Singapore and (formerly) Hong Kong, are considered to be highly free trade oriented. Others, like North Korea and Cuba, have long been relatively closed economies and these are closer to the state of autarky. The rest of the world lies somewhere in between.

Most policy discussions are not about whether government should pursue one of these two extremes. Instead, discussions focus on which direction a country should move along the trade spectrum,. Since every country today is somewhere in the middles, discussions focus on whether policies should move he nation in the direction of free trade or in the directions of autarky.

A movement in the directions of autarky occurs whenever a new trade policy is implemented if it further restricts the free flow of goods and services between countries. Since new trade policies invariable benefit domestic industries by reducing international competitions, it is also referred to as protectionism

A movement in the direction of free trade occurs when regulations on trade are removed. Since the elimination of trade policies will generally increase the amount of the international trade, it is referred to as trade liberalizations. Trade policy discussions typically focus, then, on whether the country should increase protectionism or whether it should purse trade liberalizations.

Note that, according to this definitions of protectionism, even policies that encourage trade, such as export subsidies, are considered protectionist since they alter the pattern of trade that would have prevailed in the absence of government intervention. This implies that protectionism is much more complex than can be represented along a single dimensions (as suggestions in the above diagram) since protections can both increase and decreased trade flows. Nevertheless, the representation of the trade spectrum is useful in a number of ways.

Valuable lessons of international trade theory

In this section some of the most important lessons in international trade theory are briefly presented. Often, the lessons that are most interesting and valuable are those that teach something either counterintuitive, or at least contrary to popular opinions. A number of these are represented below. Each explanations also provides links to the arguments are more fully explained. (note: for most students, following the links initially may be more confusing than helpful. However, once reading through many of the chapters review of these lessons may help reinforce them ).Terjemahannya klik disini.

Contoh studi kasus beserta analisisnya. :

1. The main support for free trade arises because free trade can raise aggregate economic efficiency?
2. Trade theory shows that some people will suffer losses in free trade ?
3. A country may benefit from free trade even if it is less efficient than all other countries in every industry?
4. A domestic firm may lose out in international competition even if it is the lowest cost producer in the world?
5. Protection may be beneficial for a country?
6. Although protection can be beneficial, the case for free remains strong? klik disini.

Jangan lupa cantumkan sumber dan komentnya gan. Terimakasih.