SKYLINE UNIVERSITY NIGERIA

IRS 3328: INTERNATIONAL ECONOMIC

RELATIONS.
Economic Bases of International Relations
(Week 1&2)
By
Dr Abdulmalik Auwal
08033477182, 08023210838
amauwal1969@yahoo.com
 Economic Bases of International
Relations
• Relations between the western world and Africa are
not a recent phenomenon. They could be traced back
to the period of the early explorers who came to
discover the "Dark Continent".
• This was followed by the institution of slave trade
which lasted for about 500 years.
• Following the era of slave trade in that chronology
was the introduction of the so-called "legitimate
trade" following the Industrial Revolution that
occurred in Europe, especially Britain, in the second
half of the 18th century.
• It was during this Industrial Revolution that capital first
left Europe to other parts of the world including Africa.
This was the period of the scramble of Africa.
• It was during this Industrial Revolution that capital first
left Europe to other parts of the world including Africa.
• The continent was seen not only as a very good market
for selling the goods produced in Europe but also as a
very good source for cheap raw materials to feed the
factories that were thrown up by the Industrial
Revolution.
• It was the competition for markets in Africa and other
third world countries-by the West that led to the formal
colonization of the continent in the 19th century.
• Importance of International Economic Relations
(IER):International economics is growing in importance
as a field of study because of the rapid integration of
international economic markets. ... One simple way to
see the rising importance of international economics is
to look at the growth of exports in the world during the
past fifty or more years.
 Conceptualization
• International economics is a field of study that assesses the
implications of international trade, international investment,
and international borrowing and lending. There are two broad
subfields within the discipline: international trade and
international finance.
• International economics refers to a study of international
forces that influence the domestic conditions of an economy
and shape the economic relationship between countries. In
other words, it studies the economic interdependence
between countries and its effects on economy.
 Conceptualization
• The scope of international economics is wide as it
includes various concepts, such as globalization, gains
from trade, pattern of trade, balance of payments, and
FDI. Apart from this, international economics describes
production, trade, and investment between countries.
• International economics has emerged as one of the most
essential concepts for countries. Over the years, the field
of international economics has developed drastically
with various theoretical, empirical, and descriptive
contributions.
 Conceptualization
• Generally, the economic activities between nations differ
from activities within nations. For example, the factors of
production are less mobile between countries due to various
restrictions imposed by governments.
• The impact of various government restrictions on production,
trade, consumption, and distribution of income are covered in
the study of internal economics. Thus, it is important to study
the international economics as a special field of economics.
 International trade
• International trade is a field in economics that
applies microeconomic models to help
understand the international economy. Its
content includes basic supply-and-demand
analysis of international markets; firm and
consumer behaviour; perfectly competitive,
oligopolistic, and monopolistic market
structures; and the effects of market
distortions.
 International trade
• The objective of an international trade is to understand the
effects of international trade on individuals and businesses
and the effects of changes in trade policies and other
economic conditions. The course develops arguments that
support a free trade policy as well as arguments that support
various types of protectionist policies.
• How international trade help the economy: As incomes in
other nations rise, the people of those nations will be able to
buy more goods and services—including foreign goods and
services. Any one country's exports thus will increase as
incomes rise in other countries and will fall as incomes drop in
other countries.
The Fields of International Trade

• Foreign manufacturing
• The growing services industry in areas such as
transportation, tourism, banking, advertising,
constructing, retailing, wholesaling, and mass
communications.
• Private---- in the case of private firms the transactions are
for profit.
• Governmental --- government-sponsored activities in
international business may or may not have a profit
orientation.
 ADVANTAGE OF INTERNATIONAL
TRADE
• Fuller utilization of Natural Resources:
• Cheaper goods
• Surplus production:
• Bulk production and economies of scale:
• Possibility of Economic Development:
• International co-operation:
 International finance
• International finance: applies macroeconomic models to help
understand the international economy. Its focus is on the
interrelationships among aggregate economic variables such
as GDP, unemployment rates, inflation rates, trade balances,
exchange rates, interest rates, and so on. This field expands
basic macroeconomics to include international exchanges. Its
focus is on the significance of trade imbalances, the
determinants of exchange rates, and the aggregate effects of
government monetary and fiscal policies. The pros and cons
of fixed versus floating exchange rate systems are among the
important issues addressed.
 Important Issues to Note
• International trade and investment flows have grown
dramatically and consistently during the past half
century.
• International trade is a field in economics that
applies microeconomic models to help understand
the international economy.
• International finance focuses on the
interrelationships among aggregate economic
variables such as GDP, unemployment, inflation,
trade balances, exchange rates, and so on.
 Reason for Studying IER
• International economics is a field that deals with the
economic interactions of a nation and its impacts or
consequences on international issues. It helps in assessing
economic and political effects and the implication to the
international trade for goods and services, finance and
foreign investment.
• International Economic Theory: the pure theory of
international economics deals with trade patterns, impact of
trade on production, rate of consumption, and income
distribution. Apart from this, it also involves the study of
effects of trade on prices of goods and services and rate of
economic growth.
• International economics deals with the economic activities of various
countries and their consequences.
• In other words, international economics is a field concerned with
economic interactions of countries and effect of international issues on
the world economic activity.
• It studies economic and political issues related to international trade and
finance.
• International trade involves the exchange of goods or services and other
factors of production, such as labour and capital, across international
borders.
• On the other hand, international finance studies the flow of financial
assets or investment across borders. International trade and finance
became possible across nations only due to the emergence of
globalization.
 Importance of Export
• Exports are incredibly important to modern economies
because they offer people and firms many more markets for
their goods. One of the core functions of diplomacy and
foreign policy between governments is to foster economic
trade, encouraging exports and imports for the benefit of all
trading parties.
• You could significantly expand your markets, leaving you less
dependent on any single one. Greater production can lead to
larger economies of scale and better margins. Your research
and development budget could work harder as you can
change existing products to suit new markets.
 Economic Activities
• Economic activity is the activity of making, providing,
purchasing, or selling goods or services. Any action that involves
producing, distributing, or consuming products or services is an
economic activity. ... Additionally, any activities involving money
or the exchange of products or services are economic activities.