Solutions Manual

to End-of-Chapter
Questions

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Trade in the Global Economy
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1. Figures 1-2 and 1-7 rely on data from the year 2006, and Figure 1-6 relies on data
from 2005, to map worldwide trade, migration, and foreign direct investment. Up-
dated data for migration and foreign direct investment were not available at the time
of writing this chapter, but are available for worldwide trade. In this question you are
asked to update the numbers for world trade shown in Table 1-1.
a. Go to the World Trade Organization website at www. wto. org and look for their
trade data under “Resources” and “Statistics.”1 Look for the most recent edition of
their International Trade Statistics publication, then go to “Trade by Region” and find
the Excel spreadsheet with “Intra- and Inter-regional Merchandise Trade.” Print out
this table. If you cannot find the website or spreadsheet, use the 2005 table for “In-
tra- and Inter-regional Merchandise Trade,” which is printed below:
Intra- and Inter-regional Merchandise Trade, 2008 (Billions of U.S. Dollars)
Destination

North South & Middle

Origin America Central America Europe CIS* Africa East Asia World

Value
World $2,708 $583 $6,736 $517 $458 $618 $3,903 $15,717
North America 1,015 165 369 16 34 60 376 2,036
South & Central
America 169 159 121 9 17 12 101 600
Europe 475 96 4,695 240 186 189 487 6,447
Commonwealth
of Independent
States (CIS) 36 10 406 135 11 25 77 703
Africa 122 19 218 2 53 14 114 558
Middle East 117 7 126 7 37 122 569 1,021
Asia 775 128 801 108 121 196 2,181 4,353
Source: WTO, International Trade Statistices 2009

b. From this table, what is the total amount of trade within Europe? What percent-
age is this of total world trade?
Answer: $4,695 billion, which is 29. 9% of the world total

1
The trade statistics are at http://www. wto. org/english/res_e/statis_e/its2009_e/its09_world_trade_dev_e. htm.

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S-4 Solutions ■ Chapter 1 Trade in the Global Economy

c. What is the total amount of trade (in either direction) between Europe and
North America? Add that to the total trade within Europe, and calculate the per-
centage of this to the world total.
Answer: $(369  475)  $844 billion. Adding that to intra-European trade, we
obtain 35. 2% of the world total.
d. What is the total amount of trade within the Americas (i. e. , between North
America, Central America, South America, and within each of these regions)?
What percentage is this of total world trade?
Answer: $(1,015 + 165 + 169 + 159) = $1,508 billion, or 9. 6% of the world
total
e. What is the total value of exports from Europe and the Americas and what per-
centage is this of the world total?
Answer: $(2,036 + 600 + 6,447) = $8,983 billion, or 57. 8% of the world total
f. What is the total value of exports from Asia, and what percentage is this of the
world total?
Answer: $4,353 billion, which is 27. 7% of the world total
g. What is the total value of exports from the Middle East and the Commonwealth
of Independent States2 and what percentage is this of the world total?
Answer: $(1,021  703)  $1,724 billion, which is 11% of the world total
h. What is the total value of exports from Africa, and what percentage is this of the
world total?
Answer: $298 billion, which is 3. 5% of the world total
i. How do your answers to (b) through (h) compare with the shares of worldwide
trade shown in Table 1-1?
Answer: The shares computed in (b) through (h) are quite similar to Table 1. 1.
Both are within one percentage point of Table 1-1.
2. The quotation from Federal Reserve Chairman Ben Bernanke at the beginning of
the chapter is from a speech that he presented in Jackson Hole, Wyoming, on August
25, 2006, entitled “Global Economic Integration: What’s New and What’s Not?”
The full transcript of the speech is available at http://www/federalreserve. gov/
newsevents/speech/bernanke20060825a. htm. Read this speech and answer the fol-
lowing questions:
a. List three ways in which international trade today is not that different from the
trade that occurred before World War I.
Answer:
i) Physical distance is the same.
ii) New transportation methods allow for more trade.
iii) Governments foster open trade, as well as financial flows.
iv) Some groups are opposed to free trade.
v) The range of goods that are tradable has broadened.
b. List three ways in which international trade today does differ from the trade that
occurred before World War I.
Answer:
i) Intra-industry trade has increased.

2
The Commonwealth of Independent States consists of: Azerbaijan, Armenia, Belarus, Georgia, Kazakhstan, Kyrgyzstan,
Moldova, Russia, Tajikistan, Turkmenistan, Uzbekistan, and Ukraine.
 Solutions ■ Chapter 1 Trade in the Global Economy S-5

ii) Information and communication technologies permit trade in services.

iii) Scale and pace of growth in trade is faster.
iv) Core-periphery pattern is no longer relevant.
v) Fragmentation of production processes has occurred.
vi) Capital markets are more mature, and gross flows are larger.