LeadingExportingCountries,2012Percentage of 10%worldexports987The rapid growth6of the Chinese5economyhas4made it the32world's largestexporter, with0TheUnitedSouthChinaUnitedGermanyFranceJapan9.3% of worldStatesNetherlandsKingdomKoreaexports.Chinatookoverthe lead from theU.S., whichFigure 7.2The eight leadingaccounts for 9.2%exporting countries,2012of world exports@2015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 6 Leading Exporting Countries, 2012 The rapid growth of the Chinese economy has made it the world’s largest exporter, with 9.3% of world exports. China took over the lead from the U.S., which accounts for 9.2% of world exports. The eight leading exporting countries, 2012 Figure 7.2
International Trade Asa Percentageof GDPExportsand90%ExportsasapercentageofGDPimportsasaImportsasapercentageofGDp80percentage ofGDP706050However, trade is40less important to3020the U.S. (and10China as well)0TheUnitedBelgiumGermanyItalyFranceChinaUnitedJapanthan it is to otherStatesNetherlandsKingdomcountrieslargelyduetotherelativesizes ofFigure 7.3Internationaltradeasaeconomies.percentageofGDP@2015PearsonEducation,lnc
© 2015 Pearson Education, Inc. 7 International Trade As a Percentage of GDP However, trade is less important to the U.S. (and China as well) than it is to other countries—largely due to the relative sizes of economies. International trade as a percentage of GDP Figure 7.3
MakingGoodyear and the Tire TarifftheConnectionYou would think Goodyear, a major U.S. tire manufacturer, wouldhave benefited strongly from reduced competition due to the tiretariff.However a spokesman for Goodyear said:"The tariffs didn't have any material impact on our North Americanbusiness.The stuff coming in from China is primarilylow end.Wegot out of that market years ago."Even worse, tires from some of Goodyear's factories in China weresubject to the tariff!At the beginning of 2013, with the tire tariff expiring, Goodyear'sprofits rose more than 50percent, despite imports of Chinese tires2015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 8 Making the Connection Goodyear and the Tire Tariff You would think Goodyear, a major U.S. tire manufacturer, would have benefited strongly from reduced competition due to the tire tariff. However a spokesman for Goodyear said: “The tariffs didn’t have any material impact on our North American business. The stuff coming in from China is primarily low end. We got out of that market years ago.” Even worse, tires from some of Goodyear’s factories in China were subject to the tariff! At the beginning of 2013, with the tire tariff expiring, Goodyear’s profits rose more than 50 percent, despite imports of Chinese tires
ComparativeAdvantageinInternational Trade7.2LEARNINGOBJECTIVEUnderstandthedifferencebetween comparative advantage andabsoluteadvantageininternationaltrade@2015PearsonEducafion,lnc
LEARNING OBJECTIVE © 2015 Pearson Education, Inc. 9 Comparative Advantage in International Trade 7.2 Understand the difference between comparative advantage and absolute advantage in international trade
Comparativeand Absolute AdvantageIn Chapter 2we introduced the concept of comparativeadvantagebeing able to produce something at a lower opportunity cost thansomeone else.In thetable,Japanhas anabsolute advantageinproducing bothcell phones and tablet computers: it can produce each with fewerresources (hours of work) than can the U.S. (or equivalentlyproduce more with the same amount of resources).But comparativeadvantagemeansthattradecanstillbeadvantageousforbothnationsOutputperHourofWorkCellPhonesTablet Computers126Japan24United StatesTable7.1Anexample of JapaneseworkersbeingmoreproductivethanAmericanworkers10@2015PearsonEducation,lnc
© 2015 Pearson Education, Inc. 10 Comparative and Absolute Advantage In Chapter 2 we introduced the concept of comparative advantage: being able to produce something at a lower opportunity cost than someone else. In the table, Japan has an absolute advantage in producing both cell phones and tablet computers: it can produce each with fewer resources (hours of work) than can the U.S. (or equivalently, produce more with the same amount of resources). But comparative advantage means that trade can still be advantageous for both nations. An example of Japanese workers being more productive than American workers Table 7.1 Output per Hour of Work Cell Phones Tablet Computers Japan 12 6 United States 2 4