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WORLD TRADE
AN OVERVIEW - Coggle Diagram
WORLD TRADE
AN OVERVIEW
PREVIEW
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Globalization, then and now
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WHO TRADE?
US trade with these countries, Canada, Mexico, China, Japan and Germany since 2003
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Which is bring up one thing, why does US trading with them, not onther countries?
SIZE MATTER, GRAVITY MODEL
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Other things besides size matter:
- Distance between market influences and cost of import and export.
- Cultural affinity
- geography
- Multinationals corporation
- Borders
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In general form, the gravity model commonly estimated
Perhaps surprisingly, the gravity model works fairly well in predicting actual trade flows, as the figure above representing US–EU trade flows suggested
DISTANCE AND BRODERS
effect of distance from the gravity model predict that a 1% increase in the distance between countries is associated with a decrease in the volume of trade of 0.7% to 1%.
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Trade agreements between countries are intended to reduce the formalities and tariffs needed to cross borders, and therefore to increase trade
does a trade agreement lead to significantly more trade among its partners than one would otherwise predict given their GDPs and distances from one another?
EX: The US has signed a free trade agreement with Mexico and Canada in 1994, the North American Free Trade Agreement (NAFTA)
The negative effect of distance on trade according to the gravity models is significant, which brings one question, HAS THE WORLD BECOME SMALLER?
history has shown that political factors, such as wars, can change trade patterns much more than innovations in transportation and communication
There were two waves of globalization
and it has few decades has international trade become more important to the British economy than it was in 1910.
1840–1914: economies relied on steam power, railroads, telegraph, telephones. Globalization was interrupted and reversed by wars and depression
1945–present: economies rely on telephones, airplanes, computers, internet, fiber optics.
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SUMMARY
The 5 largest trading partners with the US are Canada, Mexico, China, Japan and Germany.
The largest economies in the EU undertake the largest fraction of the total trade between the EU and the US.
The gravity model predicts that the volume of trade is directly related to the GDP of each trading partner and is inversely related to the distance between them
Besides size and distance; culture, geography, multinational corporations and the existence of borders influence trade
Modern transportation and communication have increased trade, but political factors have influenced trade more in history.
Today, most trade is in manufactured goods, while historically agricultural and mineral products made up most of trade.