International economics 12th edition rober j carbaugh

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This page intentionally left blank Robert J Carbaugh Professor of Economics Central Washington University International Economics, 12th Edition ª 2009, 2007 South-Western, a part of Cengage Learning Robert J Carbaugh ALL RIGHTS RESERVED No part of this work covered by the copyright herein may be reproduced, transmitted, stored or used in any form or by any means graphic, electronic, or mechanical, including but not limited to photocopying, recording, scanning, digitizing, taping, Web distribution, information networks, or information storage and retrieval systems, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the publisher VP/Editorial Director: Jack W Calhoun Editor-in-Chief: Alex von Rosenberg Executive Editor: Mike Worls Developmental Editor: Katie Yanos Marketing Manager: John Carey Sr Content Project Manager: Colleen A Farmer Technology Project Manager: Deepak Kumar Manufacturing Coordinator: Sandee Milewski Production Technology Analyst: Emily Gross Production Service: LEAP Publishing Services, Inc Compositor: Cadmus Communications For product information and technology assistance, contact us at Cengage Learning Academic Resource Center, 1-800-423-0563 For permission to use material from this text or product, submit all requests online at Further permissions questions can be emailed to Library of Congress Control Number: 2008930123 Student Edition ISBN 13: 978-0-324-58148-5 Student Edition ISBN 10: 0-324-58148-3 Sr Art Director: Michelle Kunkler Cover Design and Photo Illustration: Tin Box Studio, Cincinnati, OH Internal Design: Patti Hudepohl Cover Image: ª Getty Images, Inc Printer: RR Donnelley, Crawfordsville South-Western Cengage Learning 5191 Natorp Boulevard Mason, OH USA Cengage Learning products are represented in Canada by Nelson Education, Ltd For your course and learning solutions, visit Purchase any of our products at your local college store or at our preferred online store Printed in the United States of America 12 11 10 09 08 CONTENTS IN BRIEF CHAPTER PART The International Economy and Globalization INTERNATIONAL TRADE RELATIONS 27 29 67 CHAPTER Foundations of Modern Trade Theory: Comparative Advantage Sources of Comparative Advantage CHAPTER Tariffs Nontariff Trade Barriers 109 148 CHAPTER Trade Regulations and Industrial Policies Trade Policies for the Developing Nations 183 226 CHAPTER Regional Trading Arrangements 265 CHAPTER International Factor Movements and Multinational Enterprises 303 INTERNATIONAL MONETARY RELATIONS 335 10 The Balance of Payments 11 Foreign Exchange 337 361 CHAPTER 12 Exchange-Rate Determination 13 Balance-of-Payments Adjustments 398 426 CHAPTER 14 Exchange-Rate Adjustments and the Balance of Payments 442 CHAPTER CHAPTER 15 Exchange-Rate Systems and Currency Crises 16 Macroeconomic Policy in an Open Economy 464 498 CHAPTER 17 International Banking: Reserves, Debt, and Risk 514 CHAPTER CHAPTER CHAPTER PART CHAPTER CHAPTER CHAPTER v This page intentionally left blank CONTENTS CHAPTER The International Economy and Globalization Globalization of Economic Activity Waves of Globalization First Wave of Globalization: 1870–1914 Bike Imports Force Schwinn to Downshift Second Wave of Globalization: 1945–1980 Latest Wave of Globalization The United States as an Open Economy Trade Patterns Labor and Capital Detroit’s Big Three Face Obstacles in Restructuring Why Is Globalization Important? 3 8 11 12 14 Common Fallacies of International Trade Does Free Trade Apply to Cigarettes? Is International Trade an Opportunity or a Threat to Workers? Backlash Against Globalization Terrorism Jolts the Global Economy Competition in the World Steel Industry The Plan of This Text Summary Key Concepts & Terms Study Questions 17 18 19 21 22 24 25 25 26 26 PART 1: INTERNATIONAL TRADE RELATIONS CHAPTER 27 Foundations of Modern Trade Theory: Comparative Advantage 29 Historical Development of Modern Trade Theory The Mercantilists Why Nations Trade: Absolute Advantage Why Nations Trade: Comparative Advantage David Ricardo Production Possibilities Schedules Trading under Constant-Cost Conditions Basis for Trade and Direction of Trade Production Gains from Specialization Consumption Gains from Trade Distributing the Gains from Trade 29 29 30 31 33 34 36 36 36 37 38 Equilibrium Terms of Trade Terms-of-Trade Estimates Babe Ruth and the Principle of Comparative Advantage Dynamic Gains from Trade How Global Competition Led to Productivity Gains for U.S Iron Ore Workers Changing Comparative Advantage Trading under Increasing-Cost Conditions Increasing-Cost Trading Case Partial Specialization The Impact of Trade on Jobs 39 40 41 42 43 44 45 46 48 48 vii viii Contents Comparative Advantage Extended to Many Products and Countries More Than Two Products More Than Two Countries Exit Barriers Empirical Evidence on Comparative Advantage Does Comparative Advantage Apply in the Face of Job Outsourcing? Advantages of Outsourcing Boeing’s Outsourcing of 787 More Difficult Than Expected CHAPTER 50 50 51 52 52 54 55 56 Outsourcing and the U.S Automobile Industry Burdens of Outsourcing Some U.S Manufacturers Prosper by Keeping Production in the United States Summary Key Concepts & Terms Study Questions Exploring Further 2.1: Comparative Advantage in Money Terms Exploring Further 2.2: Indifference Curves and Trade 57 57 58 59 60 60 63 64 Sources of Comparative Advantage 67 Factor Endowments as a Source of Comparative Advantage The Factor-Endowment Theory Visualizing the Factor-Endowment Theory Applying the Factor-Endowment Theory to U.S.-China Trade Factor-Price Equalization United Auto Workers Vote Givebacks to Save Jobs Who Gains and Loses from Trade? The Stolper-Samuelson Theorem Is International Trade a Substitute for Migration? Specific Factors: Trade and the Distribution of Income in the Short Run Are Actual Trade Patterns Explained by the Factor-Endowment Theory? Does Trade Make the Poor Even Poorer? Does a ‘‘Flat World’’ Make Ricardo Wrong? Increasing Returns to Scale and Specialization Overlapping Demands as a Basis for Trade Intraindustry Trade The Product Cycle: A Technologically Based Theory of Trade 67 68 69 71 71 74 75 76 78 79 81 84 85 86 87 90 Radios, Pocket Calculators, and the International Product Cycle Dynamic Comparative Advantage: Industrial Policy Government Subsidies Support Boeing and Airbus Government Regulatory Policies and Comparative Advantage Transportation Costs and Comparative Advantage Trade Effects Nike and Reebok Respond to Sweatshop Critics: But Wages Remain at Poverty Level Falling Transportation Costs Foster Trade Boom Terrorist Attack Results in Added Costs and Slowdowns for U.S Freight System: A New Kind of Trade Barrier? Summary Key Concepts & Terms Study Questions Exploring Further 3.1: The Specific-Factors Theory 92 92 94 95 98 98 100 100 102 103 104 105 107 Contents CHAPTER Tariffs The Tariff Concept Types of Tariffs Specific Tariff Ad Valorem Tariff Compound Tariff Effective Rate of Protection Tariff Escalation Outsourcing and Offshore-Assembly Provision Dodging Import Tariffs: Tariff Avoidance and Tariff Evasion Avoiding U.S Tariff on Ethanol Fuels Boom in Caribbean Smuggled Steel Evades U.S Tariffs Postponing Import Tariffs Bonded Warehouse Foreign-Trade Zone Tariff Welfare Effects: Consumer Surplus and Producer Surplus Tariff Welfare Effects: Small-Nation Model Calculating the Welfare Effects of a Tariff Tariff Welfare Effects: Large-Nation Model CHAPTER ix 110 111 111 111 112 112 115 116 118 118 118 119 119 120 121 122 124 125 Gains from Eliminating Import Tariffs How A Tariff Burdens Exporters Steel Tariffs Buy Time for Troubled Industry Tariffs and the Poor Arguments for Trade Restrictions Job Protection Protection Against Cheap Foreign Labor Fairness in Trade: A Level Playing Field Maintenance of the Domestic Standard of Living Equalization of Production Costs Infant-Industry Argument Noneconomic Arguments Petition of the Candle Makers The Political Economy of Protectionism A Supply and Demand View of Protectionism Summary Key Concepts & Terms Study Questions 109 129 130 132 133 134 135 136 138 138 139 139 140 141 142 143 144 145 146 Nontariff Trade Barriers Import Quota Trade and Welfare Effects Allocating Quota Licenses Quotas Versus Tariffs Tariff-Rate Quota: A Two-Tier Tariff Sugar Tariff-Rate Quota Bittersweet for Consumers Export Quotas Japanese Auto Restraints Put Brakes on U.S Motorists Domestic Content Requirements Subsidies Domestic Production Subsidy 148 149 151 152 154 155 156 157 158 159 159 How ‘‘Foreign’’ Is Your Car? Export Subsidy Dumping Forms of Dumping International Price Discrimination Antidumping Regulations Smith Corona Finds Antidumping Victories Are Hollow Canadians Press Washington Apple Producers for Level Playing Field Swimming Upstream: The Case of Vietnamese Catfish Is Antidumping Law Unfair? 148 161 162 163 163 164 166 167 167 168 169 542 Glossary protective effect a tariff’s loss to the domestic economy resulting from wasted resources when less efficient domestic production is substituted for more efficient foreign production protective tariff a tariff designed to insulate import-competing producers from foreign competition purchasing-power-parity theory a method of determining the equilibrium exchange rate by means of the price levels and their variations in different nations put option gives the holder the right to sell foreign currency at a specified price Q quantity theory of money states that increases in the money supply lead directly to an increase in overall prices, and a shrinking money supply causes overall prices to fall R real exchange rate the nominal exchange rate adjusted for changes in relative price levels real exchange-rate index the average value of a currency based on real exchange rates real interest rate the nominal interest rate minus the inflation rate Reciprocal Trade Agreements Act an act passed in Congress in 1934 which set the stage for a wave of trade liberalization through negotiating authority and generalized reductions redistributive effect with a tariff, the transfer of consumer surplus, in monetary terms, to the domestic producers of the import-competing product region of mutually beneficial trade the area that is bounded by the cost ratios of the two trading countries regional trading arrangement where member nations agree to impose lower barriers to trade within the group than to trade with nonmember nations revaluation an official change in a currency’s par value, which causes the currency’s exchange value to appreciate revenue effect represents the government’s collections of tariff revenue; found by multiplying the number of imports times the tariff revenue tariff a tariff imposed for the purpose of generating tax revenues that may be placed on either exports or imports rules of the game an agreement among gold standard nations to reinforce and speed up interest rate adjustment, requiring central bankers in a surplus nation to expand credit, leading to lower interest rates; central bankers in deficit nations would tighten credit, bidding interest rates upward S safeguards relief provided by the escape clause to U.S firms and workers who are substantially injured from surges in imports that are fairly traded scientific tariff a tariff that eliminates foreign cost advantages over domestic firms Section 301 section of the Trade Act of 1974 that gives the U.S trade representative (USTR) authority, subject to the approval of the president, and means to respond to unfair trading practices by foreign nations seigniorage profit from issuing money selective quota an import quota allocated to specific countries short position the position speculators take when they borrow or sell forward a foreign currency with the anticipation of purchasing it at a future lower price to repay the foreign-exchange loan or fulfill the forward sale contract small nation a nation whose imports constitute a very small portion of the world market supply Smoot-Hawley Act act passed in 1930 under which U.S average tariffs were raised to 53 percent on protected imports social regulation governmental attempts to correct a variety of undesirable side effects in an economy that relate to health, safety, and the environment special drawing right (SDR) an artificial currency unit based on a basket of four currencies established by the IMF specific factors factors that cannot move easily from one industry to another specific tariff a tariff expressed in terms of a fixed amount of money per unit of the imported product specific-factors theory considers the income-distribution effects of trade when factor inputs are immobile among industries in the short run speculation the attempt to profit by trading on expectations about prices in the future speculative attack see currency crisis sporadic dumping (distress dumping) when a firm disposes of excess inventories on foreign markets by selling abroad at lower prices than at home spot market where foreign exchange can be traded for immediate delivery spot transaction an outright purchase and sale of foreign currency for cash settlement not more than two business days after the date of the transaction spread the difference between the bid rate and the offer rate stabilizing speculation occurs when speculators expect a current trend in an exchange rate’s movement to change and their purchase Glossary or sale of the currency moderates movements of the exchange rate static effects of economic integration include the trade-creation effect and the trade-diversion effect statistical discrepancy a correcting entry inserted into the balanceof-payments statement to make the sum of the credits and debits equal Stolper-Samuelson theorem an extension of the theory of factorprice equalization, which states that the export of the product that embodies large amounts of the relatively cheap, abundant resource makes this resource more scarce in the domestic market strategic trade policy the policy that government can assist domestic companies in capturing economic profits from foreign competitors strike price the price at which an option can be exercised subsidies granted by governments to domestic producers to improve their trade competitiveness; include outright cash disbursements, tax concessions, insurance arrangements, and loans at below-market interest rates tariff avoidance the legal utilization of the tariff system to one’s own advantage in order to reduce the amount of tariff that is payable by means that are within the law three-point arbitrage a more intricate form of arbitrage, involving three currencies and three financial centers; also called triangular arbitrage tariff escalation occurs when tariff structures of industrialized nations are characterized by rising rates that give greater protection to intermediate and finished products than to primary commodities Tokyo Round round of talks between GATT members from 1973–1979, in which signatory nations agreed to tariff cuts that took the across-the-board form initiated in the Kennedy Round tariff evasion when individuals or firms evade tariffs by illegal means such as smuggling imported goods into a country trade adjustment assistance government assistance granted to domestic workers displaced by increased imports tariff-rate quota a device that allows a specified number of goods to be imported at one tariff rate (the within-quota rate), and any imports above that specified number to be imported at a higher tariff rate (the over-quota rate) trade balance derived by computing the net exports (imports) in the merchandise accounts; also called merchandise trade balance technical analysis a method of exchange-rate forecasting that involves the use of historical exchange-rate data to estimate future values technology transfer the transfer to other nations of knowledge and skills applied to how goods are produced supply of international reserves includes owned reserves, such as key currencies and special drawing rights, and borrowed reserves, which can come from the IMF and other official arrangements or can be obtained from major commercial banks terms of trade the relative prices at which two products are traded in the marketplace swap arrangements bilateral agreements between central banks where each government provides for an exchange, or swap, of currencies to help finance temporary payments disequilibrium theory of overlapping demands nations with similar per capita incomes will have overlapping demand structures and will likely consume similar types of manufactured goods; wealthy nations will likely trade with other wealthy nations, and poor nations will likely trade with other poor nations T target exchange rates desired exchange rates for a currency set by the host country and supported by intervention tariff a tax levied on a product when it crosses national boundaries 543 terms-of-trade effect the tariff revenue extracted from foreign producers in the form of a lower supply price theory of reciprocal demand relative demand conditions determine what the actual terms of trade will be within the outer limits of the terms of trade trade promotion authority (also known as fast-track authority) devised in 1974, this provision commits Congress to consider trade agreements without amendment; in return, the president must adhere to a specified timetable and several other procedures trade remedy laws laws designed to produce a fair trading environment for all parties engaging in international business; these laws include the escape clause, countervailing duties, antidumping duties, and unfair trading practices trade triangle an area in a production possibilities diagram showing a country’s exports, imports, and equilibrium terms of trade trade-creation effect a welfare gain resulting from increasing trade caused by the formation of a regional trade bloc trade-diversion effect a welfare loss resulting from the formation of a regional trade bloc; it occurs when imports from a low-cost supplier outside the trade bloc are replaced by purchases from a higher-cost supplier within the trade bloc trade-weighted dollar a weighted average of the exchange rates between a domestic currency and the currencies of the nation’s 544 Glossary most important trading partners, with weights given by relative importance of the nation’s trade with each trade partner trading possibilities line a line in a production possibilities diagram representing the equilibrium termsof-trade ratio transfer pricing a technique where an MNE reports most of its profits in a low-tax country, even though the profits are earned in a high-tax country transition economies national economies making the transition from a centrally planned economy to a market economy transplants the assembly plants of Japanese companies that produce automobiles in the United States transportation costs the costs of moving goods from one nation to another two-point arbitrage the simultaneous purchase and sale of a currency in two foreign-exchange markets in order to profit from exchange-rate differentials in different locations U uncovered interest arbitrage when an investor does not obtain exchange-market cover to protect investment proceeds from foreigncurrency fluctuations unilateral transfers include transfers of goods and services (gifts in kind) or financial assets (money gifts) between the United States and the rest of the world Uruguay Round round of talks between GATT members from 1986–1993 in which across-theboard tariff cuts for industrial countries averaged 40 percent V variable levies an import tariff that increases or decreases as domestic or world prices change to guarantee that the price of the imported product after payment of duty will equal a predetermined price vertical integration in the case of an MNE, occurs when the parent MNE decides to establish foreign subsidiaries to produce intermediate goods or inputs that go into the production of the finished good W wage and price controls intervention by the government to set price and wage levels wage insurance after finding new jobs, a temporary government subsidy of wages granted to domestic workers displaced by foreign trade and increased imports World Bank an international organization that provides loans to developing countries aimed toward poverty reduction and economic development World Trade Organization (WTO) organization that embodies the main provisions of GATT, but its role was expanded to include a mechanism intended to improve GATT’s process for resolving trade disputes among member nations Index A Absolute advantage, principle of, 31 Absorption approach, 448 to currency depreciation, 457–459 Accenture, Acco Industries, 58 Ad valorem tariff, 111 Adjustable pegged exchange rates, 472 Adjustment mechanism, 426 automatic, 432–433 Advanced countries, agricultural export subsidies, 236 Advanced nations, 226 tensions with developing countries, 228–229 Advantage, absolute, 31 comparative, 32 Agglomeration economies, Aggregate demand and aggregate supply, 499–500 Agricultural policy, 276–278 and the EU, 275–277 Aid and growth of developing countries, 249 Aiding the developing countries, 245–249 Airbus, 56, 84, 94–95, 215, 223–225 AK Steel, 205 American Feed Co., 448 American Iron and Steel Institute, 96 American workers’ wages and immigrants, 331 Anaconda, 308 Anheuser-Busch, 207 Antidumping, and average variable cost, 169–171 Antidumping duties, 166, 202–205 overused, 171 Antidumping law, and currency fluctuations, 171 fairness of, 169–171 Antidumping regulations, 166–169 Apple producers, level playing field, 167–169 Apple, Inc., 7, 251 Appreciation, 368 of dollar, 448 of the yen, 446–448 Arbitrage, 378–379 Asia-Pacific Economic Cooperation (APEC), 295 Asset-market approach, 409–414 AT&T, 55 Autarky, 36 Automatic adjustment, 426 Automobile industry, 314–316 outsourcing and, 55–57 Average variable cost, and dumping, 169–171 yardstick for defining dumping, 169–171 Beggar-thy-neighbor policy, 129 Benelux, 267 Bestfoods, 207 Bethlehem Steel, 205 Bid rate, 365 Big Mac index, 404–405 Bilateral balance, 51 BMW, 12, 160 Boeing, 7, 56, 84, 94–95, 215, 223–225, 306 Bonded warehouse, 119 Brain drain, 328 Bretton Woods system, 472–474 Britain and the EU, 271 British Airways, 262 Buchanan, Patrick, 192 Buffer stock, 237–239 Bush, George W., 18, 19, 102, 118, 132, 210, 292 Business cycles, economic growth, and current account, 350–351 Buy American Act, 172 Buy-national policies, 172 B C Babe Ruth and the principle of comparative advantage, 41 Balance of international indebtedness, 357–358 Balance of payments, 337 multinational enterprises, 323 Balance-of-payments adjustment, 428–429 structure, 340–344 Bank exposure, reducing to developing-nation debt, 528–529 Bank of America, 371, 390 Barter terms of trade, 40 Basis for trade, 29, 36 Bastiat, Frederic, 141 Beef production, hormones in, 173 Call option, 371 Calvin Klein, 136 Canadian apple producers, 167–169 Candle makers, petition of the, 141 Capital and financial account, 341–343 and labor, 11–14 controls, 488–490 Capital/labor ratio, 68 Cartel, 241 profits, maximizing, 241–243 Casio, 92 Caterpillar Inc., 120, 130, 280, 454 Central American Free Trade Agreement (CAFTA), 292 Charles Schwab, 390 Chase Manhattan Bank, 312 545 546 Index China, and capitalism, 256–261 and the WTO, 258–260 export boom, 260 Yuan rise versus dollar, 473 Chrysler Corp., 120, 133, 160, 173, 212 Cigarettes and free trade, 18–19 Citibank, 366, 371 Clay, Henry, 294 Clean Air Act, 191 Clean float, 477 Cline, William, 83 Clinton, Bill, 18, 19, 77, 289, 291 Closed economy, 438 policies in, 500–502 Coach, 134 Coca-Cola, 23, 208, 304, 308 Commercial Metals Company, 24 Commodity Credit Corporation (CCC), 213 Commodity terms of trade, 40 Common agriculture policy, 276 Common market, 267 and EU, 279–280 Community indifference curve, 64 Comparative advantage, Babe Ruth example, 41 changing, 44–45 extended to many products and countries, 50–52 government regulatory policies, 95–98 in money terms, 63 job outsourcing, 54–59 principle of, 32 transportation costs, 98–103 Complete specialization, 38 Compound tariff, 111, 112 Computer Network Technology Inc., 375 Conditionality, 527 Conglomerate integration, 304 Conseco, Constant opportunity costs, 36 Constant-cost conditions, trading under, 36–42 Constraints imposed by free capital flows, 465–467 Consumer Product Safety Commission, 96, 97 Consumer surplus, 121 Consumption effect, 125 Consumption gains, 37 from trade, 37–38 Control Data, 212 Convergence criteria, 274 Copyrights, 208 Corporate average fuel economy standards (CAFE´), 173 Cost factors, 308 Cost-based definition, 166 Cost-cutting strategies of manufacturers in response to currency appreciation, 446–448 Cost-insurance-freight (CIF) valuation, 112 Costs and prices, exchange-rate effects of, 442–446 Countervailing duty, 200–202 Country risk, 525 Country risk analysis, 312–313 Covered interest arbitrage, 388–389 Crawling peg, 483–484 Credibility of fixed exchange rates, increasing the, 490–495 Credit risk, 525 Credit transaction, 337 Cross exchange rate, 368 Currency appreciation, 446–448 Currency areas, 282–283 Currency board, 490–492 Argentina, no panacea in, 492–493 Currency crashes, 484 Currency crises, 484–488 sources of, 485–487 Currency depreciation, absorption approach to, 457–459 monetary approach to, 459 Currency market draw day traders, 392 Currency risk, 526 Currency swap, 364 Current account, 340–341 financial flows on, 349 macroeconomic stability and, 506–507 Current account balance, net foreign investment and, 348 Current account deficit (surplus), 346, 347–355 and the U.S., 352–355 Customs union, 267 Customs valuation, 112 D DaimlerChrysler, 12–13 Datsun, 306 Deadweight loss, 125 Debit transaction, 337 Debt forgiveness, 529–530 reduction, 529–530 service/export ratio, 526 Debt/equity swaps, 528 Dell, 7, 55, 112–114 Delta Air Lines, Demand factors, 306–307 Demand for foreign exchange, 372 international reserves, 515–518 Demand-pull inflation, 507 Demonetization of gold, 522 Demonstration effect, 321 Depreciation, 368 Destabilizing speculation, 390 Detroit’s Big Three, 12–13 Devaluation, 471 Developing countries, 228–229, 249 aid and growth, 249 aiding, 245–249 export-led growth, 254 Developing nations, 226 tensions with advanced countries, 228–229 trade problems with, 229–236 Developing-nation debt, reducing bank exposure to, 528–529 trade characteristics, 226–228 Direct controls, 499 Direct exporting versus foreign direct investment/licensing, 309–310 Direct investment, foreign, 305– 308 Direction of trade, 36 Dirty float, 477 Disadvantages of automatic adjustment mechanisms, 432–433 Discount, 379 Distributing gains from trade, 38–39 Distribution of income, 67 and trade in the short run, 78–79 Diversification, 413 Index Doha to Hong Kong: failed trade negotiations, 196–197 Dollar, depreciation of, and trade deficit, 457 value of, 374–375 Dollar ups and downs, 414–415 Dollarization, 493–495 Domestic content requirements, 158–159 Domestic or foreign goods preferences, 403 Domestic production subsidy, 159–162 Domestic revenue effect, 128 Domestic workers and U.S immigration policy, 328, 330 Double-entry accounting, 337–339 Dubrinski, 119 Dumped and subsidized imports, remedies against, 203–205 Dumping, 163–165 forms of, 163 Dutch voters sidetrack integration, 275–276 Dynamic comparative advantage, 93 industrial policy, 92–94 Dynamic effects of economic integration, 268, 271–272 Dynamic gains from international trade, 42 E East Asian currencies, attack on, 487–488 East Asian economies, 254–256 Economic activity and globalization, 2–3 Economic costs and benefits of common currency, 280–284 Economic development, foreign direct investment and, 259 Economic growth and the poor, 253–254 strategies, 249–254 Economic integration, 266 and the EU, 273–275 Economic interdependence, Economic objectives of nations, 498 Economic policy coordination, international, 508–512 Economic sanctions, 217–220 Economic union, 267 Economies of scale, 85 Effective exchange rate, 376 Effective tariff rate, 113 Elasticity approach, 448–451 Eli Lilly and Company, 120 Empirical evidence on comparative advantage, 52–53 Employment, multinational enterprises, 320 EMU, challenges for, 284 Environment and WTO, 194–196 Environmental Protection Agency, 96, 191 Epson, 207 Equalization of production costs, 139 Equilibrium rate of exchange, 374 Equilibrium terms of trade, 39–40 limits for, 39 Errors and omissions, 343–344 Escape clause, 198–200 Ethanol, tariff avoidance, 118 Euro, 274 Euro facts, 281 Eurodollar market, 530–531 Europe as a suboptimal currency areas, 283 European Monetary Union (EMU), 274, 280–284 European tourists and weak dollar, 372 European Union (EU), 1, 187, 233, 267, 272–280 and economic integration, 273–275 common market, 279–280 Exchange arbitrage, 378 Exchange controls, 488 Exchange rate, 366 expected change in, 411–413 floating, 474–477 long-run, 400–408 Exchange-rate changes effects on costs and prices, 442–446 Exchange-rate determination, 372–375, 398–400 Exchange-rate flexibility, 515–517 other determinants, 517–518 Exchange-rate index, 376 Exchange-rate overshooting, 416–417 547 Exchange-rate pass-through, 454– 457, 462–463 partial, 455–457 Exchange-rate practices, 464 Exchange-rate risk: hazard of investing abroad, 386 Exchange-rate stabilization, 469–471 effectiveness of, 482–483 monetary policy, 480–482 Exchange-rate system, 465–467 Exchange-stabilization fund, 469 Exit barriers, 52 Expected change in exchange rate, 411–413 Expenditure-changing policies, 499 Expenditure-switching policies, 499 Export markets, unstable, 229–231 Export promotion and financing, 212–213 Export quotas, 156–158 welfare effects, 181–182 Export subsidy, 159, 162–163, 276, 277 Export tariff, 110 Export-Import Bank, 212 Export-led growth, 252–253 and developing countries, 254 Export-oriented policy, 252–253 External balance, 498 ExxonMobil, 304 F Facilities for borrowing reserves, 523–525 Factor endowments as a source of comparative advantage, 67–79 Factor-endowment theory, 67, 68–71 and actual trade patterns, 79–81 skills and comparative advantage, 82 Factor-price equalization, 71–75 Factors influencing success of sanctions, 218 Fair trade movement and coffee farmers, 239–240 Fallacies of international trade, 17–18 Falling (rising) dollar, 390–391 Fast-track authority, 197–198 548 Index Favorable trade balance, 29 Federal Express, 102 Financial flows and interest-rate differentials, 430–431 on current account, impact of, 349 Fiscal and monetary policy in a closed economy, 500–502 in an open economy, 502–506 under fixed exchange rates, 504–505 under floating exchange rates, 505–506 Fiscal policy, 499 Fixed exchange rates, 467 credibility of, 490–495 payments imbalances under, 433–435 policies under, 504–505 use of, 467–469 Fixed exchange-rate system, 467–474 Flat world, 84 Floating exchange rates, 474–477 policies under, 505–506 trade restrictions, and jobs, 476 Floating rates, arguments for and against, 476–477 Fluor, Flying-geese pattern of economic growth, 256 Ford Motor Company, 6, 12–13, 23, 57, 74, 133, 160, 173, 321, 383 Forecasting exchange rates, 417 foreign-exchange rates, 417–420 Foreign buyers, supplying products to, 309–312 Foreign currencies, 518–520 Foreign debt, and the U.S., 356 Foreign direct investment, 305–308 motives for, 305–308 vs direct exporting, 309–310 vs licensing, 310–311 Foreign exchange, demand for, 372 supply of, 373 Foreign labor, cheap, 136–138 Foreign or domestic goods preferences, 403 Foreign repercussion effect, 432 Foreign workers and U.S multinationals, 307 Foreign-currency hedging, 385–387 options, 371 Foreign-exchange fluctuations, 383–384 Foreign-exchange market, 361–363 speculation, 389–392, 396–397 Foreign-exchange quotations, reading, 366–368 Foreign-exchange rates, forecasting, 417–420 Foreign-exchange risk, and Volkswagen, 384–385 managing, 382–383 Foreign-exchange transactions, 363–364 and taxes, 489–490 Foreign-trade multiplier, 439, 440 Foreign-trade zone, 120 Fortune Brands, 58 Forward foreign-exchange contract, 382–383 Forward market, 369–370, 379–387 Forward rate, 379–381 and spot rate, 381 Forward transaction, 364 Free capital flows, constraints imposed by, 465–467 exchange-rate system, 465–467 Free Trade Area of the Americas (FTAA), 293–295 Free trade, 30 and cigarettes, 18–19 and insurance, 210–211 UAW example, 74 Free-on-board (FOB) valuation, 112 Free-trade area, 267 Free-trade argument, 134 Free-trade-biased sector, 142 Freight system, slowed by terrorist attacks, 102–103 French voters sidetrack integration, 275–276 Fundamental analysis, 420 Fundamental disequilibrium, 470 Fundamental forecasting— regression analysis, 424–425 Futures market, 369–370 G Gains from international trade, 29 Gateway, General Agreement on Tariffs and Trade (GATT), 187–190 GATT system, 187–188 General Arrangements to Borrow, 524 General Electric, 7, 23, 120, 212, 262, 322, 383 General Motors, 12–13, 15, 43, 133, 160, 173, 212, 306, 321 Generalized system of preferences (GSP), 248 Gillette, 207 Global competition, 43 Global economy and terrorism, 22– 25 Global quota, 149 Global savings glut, 355–357 Globalization, 2, 21–22 importance of, 14–17 waves of, 3–8 Globalization of economic activity, 2–3 Gold, 520–522 demonetization of, 522 Gold exchange standard, 521–522 Gold standard, 427, 520 Golub, Stephen, 53 Goods and services balance, 340 Government procurement policies, 172, 278–279 regulations, trade effects of, 97 regulatory policies and comparative advantage, 95–98 subsidies, 94–95 Group of Five (G-5), 511 Group of Seven (G-7), 511 Guest workers, 329 H Hamilton, Alexander, 183 Health Coverage Tax Credit, 211 Health insurance, 210–211 Heckscher, Eli, 67 Heckscher-Ohlin model, 88 Heckscher-Ohlin theory, 68 Hedging, 383 foreign-currency, 385–387 Hewlett-Packard (HP), 6–7, 92 High Sierra Sport Co., 374 Historical development of modern trade theory, 29–34 Index Hitachi, 88, 446 Home Depot, 59, 260 Home market effect, 85 Homogeneous goods, 88 Honda, 12–13, 74, 85, 133, 157, 445 Honda/Acura, 160 Hoover, Herbert, 185 Horizontal integration, 304 Huffy, 100 Hume, David, 30 Hussein, Saddam, 219 Hyundai, 12 I IBM, 55, 88, 120, 338 Illegal Immigration Reform and Immigrant Responsibility Act, 330 IMF, see International Money Fund Immigrants and American workers’ wages, 331 Immigration, 328–331 Immigration and Nationality Act, 330 Immigration and Reform Act, 330 Impetus for regionalism, 268 Import license, 148 Import quota, 148–152 Import substitution, 250–251 Import tariff, 110 gains from eliminating, 129 postponing, 119–120 Importance of being unimportant, 40 Imports, dumped and subsidized, 203–205 Import-substitution laws backfire on Brazil, 251 Impossible trinity, 466 Income adjustments, 431–432 mechanism for, 438–441 Income determination, 432 Increasing opportunity costs, 45 Increasing returns to scale, 85 and specialization, 85–86 Increasing-cost trading case, 46–48 Indexes of foreign-exchange value of the dollar, 374–375, 376–378 India, economic growth, 261–263 Indifference curve, 64 and trade, 64–66 Industrial policy, 93 dynamic comparative advantage, 92–94 of Japan, 213–214 of U.S., 211–213 Infant-industry argument, 139 Inflation differentials and exchange rate, 407 Inflation rates, 403–408 Inflation with unemployment, 507–508 Inland Steel Industries Inc., 205 Integration, and French and Dutch voters, 275–276 Intel, 7, 45 Intellectual property, 207 Intellectual property rights (IPRs), 207–209 Interbank market, 365 Interbank trading, 364–366 Interest arbitrage, 387–389 Interest rates, relative levels of, 409–411 Interest-rate adjustments, 429 differentials and financial flows, 430–431 Interindustry specialization, 88 trade, 87 Internal balance, 498 International Business Machines (IBM), 120 International commodity agreements (ICAs), 237 International debt problem, 526–528 International economic policy coordination, 508–512 International gold standard, 520–521 International indebtedness, balance of, 357–358 International joint ventures, 316–320 welfare effects of, 317–320 International labor mobility, 325–331 International labor standards and social dumping, 244 International lending risk, 525–526 549 International Monetary Fund (IMF), 21, 230, 247–248, 464, 485, 509, 514 drawings, 524 International Monetary Market (IMM), 369 International payments process, 339 International price discrimination, 164–165 International product cycle, 92 International reserves, 514–515 demand for, 515–518 supply of, 518 International trade, 19–21, 76–78 fallacies of, 17–18 theory and multinational enterprise, 313–314 International transaction, 337 Intraindustry specialization, 88 trade, 87–90 Invacare Corporation, 15 Investment flows, 413 Iraqi sanctions, 219–220 Iron ore workers, and global competition, 43 Isuzu, 157, 160 J J.P Morgan Chase & Co., 390 Japanese auto restraints put brakes on U.S motorists, 157–158 Japanese firms move output overseas to limit effects of strong yen, 445 Japanese transplants in U.S automobile industry, 314–316 J-curve effect, 451–454 Job outsourcing and comparative advantage, 54–59 Job protection, 135–136 Joint ventures, international, 317–320 Judgmental forecasts, 418 K Kathie Lee, 100 Keds, 100 Kellogg Co., 279 Kennedy Round, 189 Kennedy, John F., 189 Kentucky Fried Chicken, 311 550 Index Key currency, 467 Keynes, John Maynard, 438 Kletzer, Lori, 210 Kmart, 149 Kodak, 208 Kyoto Protocol, 96 L Labor and capital, 11–14 Labor mobility, 327 Labor theory of value, 31 Laden, Osama bin, 22 Large-nation, 125 Law of comparative advantage, 14 Law of one price, 403–404 Leaning against the wind, 478 Lending risk, international, 525–526 Leontief paradox, 80 Leontief, Wassily, 79 Level playing field, 138 License on demand allocation, 154 Licensing versus foreign direct investment, 310–311 Limited market access, 233–236 Linder, Staffan, 86–87 Liquidity problem, 519 Long position, 397 Long-run exchange rates, 400–408 Lowe’s, 59 LTV Corp., 205 Lumber duties hammer home buyers, 201–202 M Maastricht Treaty, 274 MacDougall, G D A., 52 Macroeconomic stability and the current account, 506–507 Magnification effect, 76 Managed floating rates, 477–483 in short run and long run, 478–480 Managed floating system, 477 Mann, Catherine, 55 Margin of dumping, 166 Marginal rate of transformation (MRT), 35 Markel Corporation, 383–384 Market economy, 296 Market equilibrium, achieving, 474–476 Market expectations, 398 Market fundamentals, 398 Market-oriented economy, 296–299 Marshall-Lerner condition, 449 Mattel, 260 Maturity months, 370 McCain, John, 168 Mercantilists, 29 Merchandise trade balance, 340 Merrill Lynch, 371 Microsoft Corporation, 7, 207, 321, 382 Migration, 325–331 and international trade, 76–78 Mill, John Stuart, 39 Ministry of Economy, Trade and Industry (METI), 214 Minnesota Mining & Manufacturing Co (3M), 385 Mitsubishi, 160 Monarch, 306 Monetary adjustments, 433–435 Monetary and fiscal policy in a closed economy, 500–502 in an open economy, 502–506 under fixed exchange rates, 504–505 under floating exchange rates, 505–506 Monetary approach, 449 to exchange-rate adjustment, 459 Monetary policy, 499 and exchange-rate stabilization, 480–482 Monetary union, 267 Mongoose, Moore, Michael, 230 Moral-hazard problem, 247 Most favored nation (MFN) clause, 186 Motives for foreign direct investment, 305–308 Motorola, 45 Multifiber Arrangement (MFA), 199 Multilateral contracts, 239 Multilateral trade negotiations, 172, 188–190 Multilateral trading relationships, 51 Multilateralism versus regional integration, 265–266 Multinational enterprise (MNE), 303–305 and international trade theory, 313–314 as source of conflict, 320–325 Multiplier process, 439 N Nader, Ralph, 192 NAFTA, see North American Free Trade Agreement National sovereignty and WTO, 192–193 National sovereignty, multinational enterprises, 322–323 National Steel, 205 Net creditor, 357 Net debtor, 357 Net foreign investment, 348 New Balance, 100 Nike, 244 sweatshop criticism, 100 Nissan, 12, 133, 157, 445 Nissan/Infiniti, 160 Nominal exchange rates, 376 Nominal exchange-rate index, 376 Nominal interest rate, 409 Nominal tariff rate, 113 Nonmarket economy, 296 Nontariff trade barriers (NTBs), 148 other, 172–175 Nordstrom, 133 Normal trade relations, 186 North American Free Trade Agreement (NAFTA), 43, 77, 186, 187, 197, 233, 267, 284–293 and trade diversion, 290–291 benefits and costs, 285–290 optimum currency area, 292–293 No-trade boundary, 39 Nucor Inc., 24, 443–444 O Oakley, 134 Occupational Safety and Health Administration (OSHA), 96, 97 Offer rate, 365 Official exchange rate, 469 Official reserve assets, 343 Official settlements transactions, 342 Index Offshore-assembly provision, 116–117 Ohlin, Bertil, 67 Opel, 306 Open economy, 439, 505 crowding, 503 policies in, 502–506 U.S as, 8–14 Openness, Opportunity cost, 35 Optimum currency area, 282–283 Optimum tariff, 128 Option, 371 Organization of Petroleum Exporting Countries (OPEC), 1, 40, 51, 110, 240–245 as a cartel, 243–245 oil cartel, 240–245 Osama bin Laden, 22 OSHA, see Occupational Safety and Health Administration Outer limits for the equilibrium terms of trade, 39 Outsourcing, 6, 54–59, 116–117, 158 advantages of, 55–57 Boeing, 56 burdens of, 57 Overall balance, 498 Overlapping demands, as a basis for trade, 86–87 theory of, 86 Overshooting, 416 P Pacific Cycle Company, Par value, 469 Partial specialization, 48 Patents, 208 Payment imbalances under fixed exchange rates, 433–435 Pepsi-Cola, 304, 308 Persistent dumping, 163 Philips, Polaroid, 208 Policy agreement versus policy conflict, 506–507 Policy conflict versus policy agreement, 506–507 Policy coordination, 510–512 in theory, 509–510 Policy implications, 435 Policy instruments, 499 Political economy of protectionism, 142–144 Predatory dumping, 163 Premium, 379 Price adjustments, 427–429 Priced-based definition, 166 Price-specie-flow doctrine, 30 Primary products, 226 Primary-product prices, stabilizing, 237–240 Principle of absolute advantage, 31 comparative advantage, 32 Procter & Gamble, Producer surplus, 122 Product cycle, 90–92 Product life cycle theory, 90 Production and export controls, 237 Production costs, equalization of, 139 Production gains, 36 from specialization, 36–37 Production possibilities schedule, 34–36 Production sharing, 158 Protection of intellectual property rights, 207–209 Protection-biased sector, 142 Protectionism, political economy of, 142–144 supply and demand view, 143–144 Protective effect, 125 Protective tariff, 110 Purchasing power parity, 403–408 theory of, 405–406 Put option, 371 Q Quality Carriers, Inc., 102 Quanta Computer Co., Quantity theory of money, 427 Quota Law, 330 Quota licenses, allocating, 151–152 Quotas vs tariffs, 152–154 R Ralph Lauren, 134 Reading foreign-exchange quotations, 366–368 Reagan, Ronald, 4, 414 Real exchange rate, 377 index, 377 551 Real interest rate, 410 Reciprocal demand, theory of, 39 Reciprocal Trade Agreements Act, 186–187 Redistributive effect, 124 Reducing bank exposure to developing-nation debt, 528–529 Reebok, sweatshop criticism, 100 Region of mutually beneficial trade, 39 Regional integration versus multilateralism, 265–266 Regional trading arrangement, 265, 266–268 effects, 268–272 Regionalism, impetus for, 268 Regression analysis, 424–425 Relative levels of interest rates, 409–411 Relative price levels, 401–402 Relative productivity levels, 403 Remedies against dumped and subsidized imports, 203–205 Repatriated earnings, 55 Reserves, facilities for borrowing, 523–525 Retaliatory tariffs and WTO, 193–194 Revaluation, 471 Revenue effect, 124 Revenue tariff, 110 Ricardian model, 52–54, 88 Ricardo, David, 31–34, 38–39, 52–54, 67, 84, 92 Rockwell, 212 Roosevelt, Franklin, 185 Rubin, Robert, 375 Rules of the game, 429 Russia and the WTO, 299–300 S Safe havens, 413 Safeguards, 198–200 Safeway, 151, 240 Sanctions, factors influencing success of, 218 Schwinn, Scientific tariff, 139 Sea transport and freight restrictions, 174–175 Sears, Roebuck and Co., 212, 382 552 Index Section 301, unfair trading practices, 206–207 Seigniorage, 495 Selective quota, 149 Shell, 308 Short position, 397 Short-run exchange rates, 409–414 Sipco Molding Technologies, 448 Small nation, 122 Small-nation model, 122–125 Smith Corona, and antidumping, 167 Smith, Adam, 30–34 Smoot-Hawley Act, 184–186 Smoot-Hawley tariff, 129 Social dumping, 244 Social regulations, 173–174 Sony Corp., 59, 114, 375 Soros, George, 485 South Korean Steel Inc., 164 Southwestern Airlines, 55 Special drawing right (SDR), 469, 522–523 Specialization, production gains from, 36–37 Specific factors, 78 Specific tariff, 111 Specific-factors theory, 78, 107–108 Speculation, 389 Speculative attack, 484 Speculators attack East Asian currencies, 487–488 Sporadic dumping, 163 Spot market, 369 Spot rate and forward rate, 381 Spot transaction, 363 Spread, 365 Stabilizing primary-product prices, 237–240 Stabilizing speculation, 390 Standard of living, domestic, 138 Static effects of economic integration, 268–271 Statistical discrepancy, 343–344 Steel, tariff avoidance, 118–119 Steel industry, 24 Steelmakers, and tariffs, 132 Stiglitz, Joseph, 230–231 Stolper-Samuelson theorem, 75–76, 78 Strategic trade policy, 214–216 Stride Rite, 100 Strike price, 371 Subaru, 160 Subsidies, 159–163 Sugar-tariff-rate quota, 155–156 Sunlock Comptometer, Inc., 92 Supply of foreign exchange, 373 Supply of international reserves, 518 Supplying products to foreign buyers, 309–312 Suzuki, 157 Swap arrangements, 525 Sweatshops, 100–101 T Target exchange rates, 478 Tariff(s), 110 and the poor, 133–134 avoidance and evasion, 118–119 escalation, 115–116 evasion, 118 exporter burden, 130–132 import, 129 policies before 1930, 183–184 protection, rate of, 112–115 scientific, 139 steel trade, 132 two-tier, 154–156 types of, 111–112 vs quotas, 152–154 Tariff welfare effects, 121–130 calculating, 124 consumer surplus, 121 large-nation model, 125–130 producer surplus, 122 small-nation model, 122–125 Tariff-rate quota, 154–156 Tariff-rate quota welfare effects, 179–180 Taxation, multinational enterprises, 324 Taxes, and foreign-exchange transactions, 489–490 Technical analysis, 419 Technical forecasts, 419 Techniques of foreign-exchange market speculation, 396–397 Technology transfer, 321–322 Tenneco, 304 Tensions between developing countries and advanced countries, 228–229 Terms of trade, 29 effect, 128 estimates, 40–42 Terrorism and global economy, 22–25 Terrorist attack results in added costs and slowdowns for U.S freight system, 102–103 Texas Instruments, 7, 45, 92, 251 Textiles from China, safeguards limiting, 199–200 Theory of overlapping demands, 86 Theory of reciprocal demand, 39 Three-point arbitrage, 378 Tokyo Round, 189 Toshiba Corp., 445 Toyota Motor Company, 12, 74, 85, 91, 133, 157, 158, 306, 312, 445, 447, 454, 462 Toyota/Lexus, 160 Trade, advantage of, 30–31 distributing gains from, 38–39 dynamic gains from, 42–43 equilibrium terms of, 39 fairness in, 138 interindustry, 87 intraindustry, 87–90 mutually beneficial, 39 overlapping demands as a basis for, 86–87 product cycle and, 90–92 worsening terms of, 232–233 Trade adjustment assistance, 209–210 Trade and distribution of income in the short run, 78–79 Trade and welfare effects, 149–151 Trade balance, 344 Trade barriers, 403 Trade boom, falling transportation costs, 100–102 Trade deficit, and dollar depreciation, 457 Trade disputes, settling, 191–192 Trade diversion, NAFTA and, 290–291 Trade effects, 98–100 of governmental regulations, 97 Trade impact on jobs, 48–49 Trade negotiations, failed, 196–197 Trade patterns, 8–11 and the factory-endowment theory, 79–81 Index Trade policy, strategic, 214–216 Trade problems of developing nations, 229–236 Trade promotion authority, 197–198 Trade remedy laws, 198 Trade restriction, cheap foreign labor, 136–138 job protection, 135–136 noneconomic arguments, 140 arguments for, 134–142 jobs, and floating exchange rates, 476 Trade theory, modern, 29–34 Trade triangle, 38 Trade-creation effect, 270 Trade-diversion effect, 270 Trademarks, 208 Trade-weighted dollar, 376 Trading possibilities line, 38 Trading under constant-cost conditions, 36–42 Trading under increasing-cost conditions, 45–48 Transfer pricing, 324 multinational enterprises, 325–326 Transition economies, 295–300 Transplants, 314 Transportation costs, 98 and comparative advantage, 98–103 falling, 100–102 Trek Bicycle Inc., 4, 375 Two-point arbitrage, 378 Two-tier tariff, 154–156 U V U.S and current account deficits, 352–355 U.S as debtor nation, 356, 358 U.S balance of payments, 344–347 U.S immigration policy and domestic workers, 328, 330 U.S International Trade Commission (ITC), 166, 168, 171 U.S multinationals and foreign workers, 307 U.S steel companies, unfair trade case, 205 U.S Steel, 205 U.S steelmakers, 96 U.S Tariff Act, 139 U.S tariff policies before 1930, 183–184 UAW, see United Auto Workers Uncovered interest arbitrage, 387–388 Unemployment, inflation with, 507–508 Unfair trading practices, 206–207 Unilateral transfers, 341 United Auto Workers (UAW), 74, 142, 157, 315 United Fruit, 308 United Nations, 233 United Parcel Service, 102 Unstable export markets, 229–231 Uruguay Round, 189 Uruguay Round Agreements Act, 197 Variable levies, 276 Vertical integration, 304 Vietnamese catfish, case of, 168 Volkswagen, 12, 306, 384–385 553 W Wage and price controls, 508 Wage insurance, 210–211 Wages, inequality between skilled and unskilled workers, 83 Wal-Mart, 4, 59, 100, 133, 260, 262 Warehouse, bonded, 119 Warner-Lambert Drug Co., 208 Washington apple producers, 167–169 Welfare effects, trade and, 149–151 Welfare effects of international joint ventures, 317–320 strategic trade policy, 223–225 World Bank, 21, 81, 230, 245–247 World Health Organization, 17 World Trade Organization (WTO), 19, 21–22, 95, 155, 171, 186, 187, 190–196, 228 and China, 258–260 and environment, 194–196 and national sovereignty, 192–193 and retaliatory tariffs, 193–194 Worsening terms of trade, 232–233 Y Yamaha, 207 Young, Andrew, 244 This page intentionally left blank The Economic Report of the President International Trade Commission Description: Information about the U.S and world economies, as well as recent and historical international trade statistics Description: Information about U.S tariffs as well as many documents that address contemporary issues in international economics The U.S Census Bureau Description: Extensive, recent, and historical data on U.S exports, imports, and trade balances with individual countries The U.S Census Bureau has also developed a profile of U.S exporting companies The World Bank Group Description: One of the world’s largest sources of developmental assistance This site provides economic briefs and data for countries by region Bureau of Industry and Security/ U.S Department of Commerce Description: Information on U.S export controls, including restrictions on exports of nuclear weapons and financial services encryption products Office of the United States Trade Representative (OUSTR) United Nations Statistics Description: Reports issued by the OUSTR and related entities including the National Trade Estimate Report on Foreign Trade Barriers Description: International data from the United Nations’ home page covering a wide range of variables European Union/Sectoral and Trade Barriers Database World Trade Organization Description: Sectoral and Trade Barriers Database of selected countries prepared by the European Union Description: Includes a brief biographical sketch of David Ricardo, information on recent world trade and output growth, and a summary of arguments in favor of free trade The Institute for International Economics Description: Sources of information relevant to international equilibrium, including essays and working papers The Penn World Dataset Description: Statistics on 28 key economic variables for the world’s major economies from 1950 to 1992, including GDP per capita adjusted for changes in terms of trade U.S Department of Commerce/ International Trade Administration Description: Trade statistics for the United States by world, region, or country Bureau of Labor Statistics/Foreign Labor Statistics Description: Comparison of the hourly compensation of U.S workers in manufacturing to that of workers in other countries The Department of State Description: Reports on the history, politics, and economic and trade policies of the regions and countries with which the United States regularly trades The Export-Import Bank Description: Information and services from the government-held corporation that encourages the sale of U.S goods in foreign markets National Science Foundation Description: Information on R&D expenditures and the extent of government support in the United States United Nations Conference on Trade and Development (UNCTAD) Description: UNCTAD is an organization that helps developing nations compete in world markets CIA’s Handbook of International Economic Statistics Description: Comprehensive information on most countries and territories, including geography, natural resources, demographics, government, and economic statistics Free Trade Area of the Americas Description: Information about the plan to integrate the economies of North and South America Asia-Pacific Economic Cooperation Description: Regional organization of 18 countries that promotes free trade and economic coordination European Union Description: Information and news items related to the European Union Association of Southeast Asian Nations (ASEAN) Description: Information and news items about ASEAN’s role in promoting economic growth, social progress, and cultural development of ten Southeast Asian nations U.S Department of Agriculture/ Foreign Agricultural Service Description: Detailed look at various countries’ exports and imports of agricultural products to and from the U.S Council on Foreign Relations Description: National organization that is committed to the study and debate of America’s global role Site includes some of their recent studies on international finance and trade Federal Reserve Bank of New York Description: Go to News Items and Foreign Exchange, which includes regular reports on the Fed’s intervention in foreign-exchange markets Bank for International Settlements/ Central Banks U.S Citizenship and Immigration Services Description: Links to numerous central banks around the world The International Monetary Fund (IMF) Description: Comprehensive statistics on U.S immigration Bureau of Economic Analysis Description: Information on the U.S balance of payments, U.S exports and imports, and the international investment position of the United States White House Briefing Room Description: Summary statistics on international aspects of the economy Federal Reserve Bank of St Louis Description: Provides historical information on exchange rates Pacific Rate Exchange Service Description: Provides information on current and past daily exchange rates, as well as exchange-rate forecasts for the Canadian dollar relative to five other major currencies Asian Development Bank Description: Promotes the economic and social progress of its developing member countries It has extensive reports and statistics on a number of Asian countries Description: International Monetary Fund provides loans, technical assistance, and policy guidance to developing members in order to reduce poverty, improve living standards, and safeguard the stability of the international monetary system Bank for International Settlements Description: News, publications, and services of the Bank for International Settlements, which facilitates international policy coordination through its monthly meetings of central bank officials Organisation for Economic Cooperation and Development (OECD) Description: Paris-based organization of 29 countries Its goal is to develop compatible, wide-ranging policies that boost prosperity National Bureau of Economic Research (NBER) Description: Provides online data and summaries of research studies relating to international finance, trade, and investment European Central Bank Description: Information on Eurocurrency, including pictures of its design and a discussion of the changeover process [...]... include them in their courses Preface xix SUPPLEMENTARY MATERIALS International Economics Web Site ( /economics/ carbaugh) In this age of technology, no text package would be complete without Web-based resources An international economics Web site is offered with the twelfth edition This site, /economics/ carbaugh, contains many useful pedagogical enrichment features... recent theoretical and policy developments in international trade and finance INTERNATIONAL ECONOMICS THEMES This edition highlights five current themes that are at the forefront of international economics:  Globalization of economic activity  Waves of globalization—Ch 1  Has globalization gone too far?—Ch 1  Putting the H-P Pavilion together—Ch 1  Terrorism jolts the global economy—Ch 1 and Ch 3 ... previous editions, the twelfth edition of International Economics streamlines its presentation of theory so as to provide greater flexibility for instructors First, the new edition makes greater use of Exploring Further sections at the end of chapters to discuss more advanced theoretical topics These revisions enhance the ability of instructors to emphasize contemporary applications of international economics. .. students to learn a subject is to demonstrate how it is used in practice The first eleven editions of International Economics reflected this belief and were written to provide a serious presentation of international economic theory with an emphasis on current applications Adopters of these editions strongly supported the integration of economic theory with current events This edition has been revised... chapter The Instructor’s Manual with Test Bank is available for download for qualified instructors from the Carbaugh Web site ( /economics/ carbaugh) under ‘‘Instructor Resources.’’ Study Guide To accompany the twelfth edition of the international economics text, Professor Jim Hanson of Willamette University has prepared a Study Guide (ISBN 0-324-58899-2) for students This guide reinforces... seeing this edition to its completion Thanks also to Colleen Farmer, who orchestrated the production of this book in conjunction with Malvine Litten, project manager at LEAP Publishing Services I also appreciate the meticulous efforts that Rachel Morris did in the copyediting of this textbook Moreover, John Carey, Betty Jung, and Sarah Greber did a fine job in advertising and marketing the twelfth edition. .. Study Center’’ section of the Carbaugh site ( /economics/ carbaugh) In addition, students and instructors alike can address questions and provide commentary directly to the author with the Talk to the Author feature For other high-tech study tools, visit the South-Western Economics Resource Center at /economics PowerPoint Slides The twelfth edition also includes PowerPoint... Carbaugh Web site ( /economics/ carbaugh) within ‘‘Instructor Resources.’’ The slides offer professors flexibility in enhancing classroom lectures Slides may be edited to meet individual needs Instructor’s Manual To assist instructors in the teaching of international economics, I have written an Instructor’s Manual with Test Bank (ISBN 0-324-58901-8) that accompanies the twelfth edition. .. Price Adjustments Gold Standard Quantity Theory of Money Balance-of-Payments Adjustment Interest Rate Adjustments Financial Flows and Interest Rate Differentials Income Adjustments Disadvantages of Automatic Adjustment Mechanisms CHAPTER 427 427 427 428 429 430 431 Monetary Adjustments ... Lehrer, Northwestern University Jim Levinsohn, University of Michigan Benjamin Liebman, St Joseph’s University Susan Linz, Michigan State University Andy Liu, Youngstown State University Mike Marks, Georgia College School of Business Al Maury, Texas A&I University John Muth, Regis University Jose Mendez, Arizona State University Mary Norris, Southern Illinois University John Olienyk, Colorado State University
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