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- Cambridge Studies in Economic History - Second Series
Among the book series in archaeology published by Cambridge University Press are: . Among the book series in area studies published by Cambridge University Press are: . Among the book series in the arts published by Cambridge University Press are: . Among the book series in chemistry published by Cambridge University Press are: . Among the book series in classical studies published by Cambridge University Press are. This means that countries exported goods that were very different to what they imported — England exchanged machines for Australian wool and Indian tea.
As transaction costs went down, this changed. In the second wave of globalization we are seeing a rise in intra -industry trade i. France, for example, now both imports and exports machines to and from Germany. The following visualization, from the UN World Development Report , plots the fraction of total world trade that is accounted for by intra-industry trade, by type of goods.
As we can see, intra-industry trade has been going up for primary, intermediate and final goods. This pattern of trade is important because the scope for specialization increases if countries are able to exchange intermediate goods e. Above we took a look at the broad global trends over the last two centuries. The next chart plots estimates of the value of trade in goods, relative to total economic activity i.
These historical estimates obviously come with a large margin of error in the measurement section below we discuss the data limitations ; yet they offer an interesting perspective. Each country tells a different story. If you add the Netherlands, for example, you will see how important the Dutch Golden Age was. Here is the same chart but showing imports , rather than exports.
Institutions and European Trade | Sheilagh Ogilvie Book | In-Stock - Buy Now | at Mighty Ape NZ
In the next chart we plot, country by country, the regional breakdown of exports. This gives us an interesting perspective on the changing nature of trade partnerships. In India, we see the rising importance of trade with Africa — this is a pattern that we discuss in more detail below.
This metric gives us an idea of integration, because it captures all incoming and outgoing transactions. The higher the index the larger the influence of trade on domestic economic activities. The visualization presents a world map showing the trade openness index country by country.
Cambridge Studies in Economic History - Second Series
For any given year, we see that there is a lot of variation across countries. The weight of trade in the US economy, for example, is much lower than in other rich countries.
If you press the play button in the map, you can see changes over time. This reveals that, despite the great variation between countries, there is a common trend: Over the last couple of decades trade openness has gone up in most countries. Expressing trade values as a share of GDP tells us the importance of trade in relation to the size of economic activity. The chart shows the value of exports goods plus services in dollars, country by country. All estimates are expressed in constant dollars i.
The main takeaway here are the country-specific trends, which are positive and more pronounced than in the charts showing shares of GDP. This is not surprising: most countries today produce more than a couple of decades ago ; and at the same time they trade more of what they produce. Here is the same chart, but showing imports rather than exports.
Trade transactions include goods tangible products that are physically shipped across borders by road, rail, water, or air and services intangible commodities, such as tourism, financial services, and legal advice. Many traded services make merchandise trade easier or cheaper—for example, shipping services, or insurance and financial services. Trade in goods has been happening for millenia ; while trade in services is a relatively recent phenomenon. Globally, trade in goods accounts for the majority of trade transactions. This interactive chart shows trade in services as share of GDP across countries and regions.
Firms around the world import goods and services, in order to use them as inputs to produce goods and services that are later exported. That is, the share of the value of exports that comes from foreign inputs. Foreign value added in trade peaked in — after two decades of continuous increase. This is consistent with the fact that, after the global financial crisis, there has been a slowdown in the rate of growth of trade in goods and services, relative to global GDP. This is a sign that global integration stalled after the financial crisis. The integration of global value chains is a common source of measurement error in trade data, because it makes it hard to correctly attribute the origin and destination of goods and services.
We discuss this in more detail below. The following interactive chart from the Observatory for Economic Complexity OEC , at the Massachusetts Institute of Technology, shows a breakdown of total world merchandise exports by product category, for You can visit the OEC website to see this composition country by country.
In this embedded interactive chart you can use the options at the bottom to change how the data is presented. If we consider all pairs of countries that engage in trade around the world, we find that in the majority of cases, there is a bilateral relationship today: Most countries that export goods to a country, also import goods from the same country.
The following interactive visualization shows this. In this chart, all possible country pairs are partitioned into three categories: the top portion represents the fraction of country pairs that do not trade with one-another; the middle portion represents those that trade in both directions they export to one-another ; and the bottom portion represents those that trade in one direction only one country imports from, but does not export to, the other country. As we can see, bilateral trade is becoming increasingly common the middle portion has grown substantially.
As we can see, up until the Second World War the majority of trade transactions involved exchanges between this small group of rich countries.
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But this has been changing quickly over the last couple of decades, and today trade between non-rich countries is just as important as trade between rich countries. Here is a stacked area chart showing the total composition of exports by partnership. The last few decades have not only seen an increase in the volume of international trade, but also an increase in the number of preferential trade agreements through which exchanges take place.
A preferential trade agreement is a trade pact that reduces tariffs between the participating countries for certain products. The following visualization shows the evolution of the cumulative number of preferential trade agreements that are in force across the world, according to the World Trade Organization WTO.
These numbers include notified and non-notified preferential agreements the source reports that only about two-thirds of the agreements currently in force have been notified to the WTO , and are disaggregated by country groups. This figure shows the increasingly important role of trade between developing countries South-South trade , vis-a-vis trade between developed and developing countries North-South trade.
In the late s, North-South agreements accounted for more than half of all agreements — in , they accounted for about one quarter. Today, the majority of preferential trade agreements are between developing economies. The increase in trade among emerging economies over the last half century has been accompanied by an important change in the composition of exported goods in these countries. Two points stand out. First, there has been a substantial decrease in the relative importance of food exports since s in most countries although globally in the last decade it has gone up slightly.
And second, this decrease has been largest in middle income countries, particularly in Latin America. Regarding levels, as one would expect, in high income countries food still accounts for a much smaller share of merchandise exports than in most low- and middle-income-countries. Economic costs include physical inputs the value of the stuff you use to produce the good , plus forgone opportunities when you allocate scarce resources to a task, you give up alternative uses of those resources.
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The forgone opportunities of production are key to understand this concept. It is precisely this that distinguishes absolute advantage from comparative advantage. To see the difference between comparative and absolute advantage, consider a commercial aviation pilot and a baker. Suppose the pilot is an excellent chef, and she can bake just as well, or even better than the baker. In this case, the pilot has an absolute advantage in both tasks.
Yet the baker probably has a comparative advantage in baking, because the opportunity cost of baking is much higher for the pilot. At the individual level, comparative advantage explains why you might want to delegate tasks to someone else, even if you can do those tasks better and faster than them.
This may sound counterintuitive, but it is not: If you are good at many things, it means that investing time in one task has a high opportunity cost, because you are not doing the other amazing things you could be doing with your time and resources. So, at least from an efficiency point of view, you should specialize on what you are best at, and delegate the rest. The same logic applies to countries. In countries with relative abundance of certain factors of production, the theory of comparative advantage predicts that they will export goods that rely heavily in those factors: a country typically has a comparative advantage in those goods that use more intensively its abundant resources.
Colombia exports bananas to Europe because it has comparatively abundant tropical weather.