1、Chapter 10International Trade and Economic GrowthoThere is a great diversity among the developing countries in terms of their income per capita.oWhy are some countries so much poorer than others?nFor about 30 years after World War II trade policies in many developing countries were strongly influenc
2、ed by the belief that the key to economic development was creation of a strong manufacturing sector.pThe best way to create a strong manufacturing sector was by protecting domestic manufacturers from international competition.IntroductionIntroductionTable 1:Gross Domestic Product Per Capita,1999(dol
3、lars)Definition&Types of Growth oDefinition of GrowthnIncreases in factor endowments nFactor-saving technological progressoTypes of GrowthnBalanced GrowthnBiased Growth:pImport Replacing(IR)GrowthpExport Expanding(EE)Growth nExample:China labor abundant,Rice:labor-intensive,Steel:capital-intensive E
4、xport rice&Import steel The balanced growth both industries grow at the same rate.SteelRiceBalanced GrowthIR Growth “进口替代型增长”指的是进口替代行业的生产能力增长得比较快，从而使得国内生产增加，一部分原来进口的商品被国内的产品替代了。SteelRiceoFrom World War II until the 1970s many developing countries attempted to accelerate their development by limiting
5、 imports of manufactured goods to foster a manufacturing sector serving the domestic market.oThe most important economic argument for protecting manufacturing industries is the infant industry argument.Import-Substituting IndustrializationImport-Substituting IndustrializationoThe Infant Industry Arg
6、umentnIt states that developing countries have a potential comparative advantage in manufacturing and they can realize that potential through an initial period of protection.nIt implies that it is a good idea to use tariffs or import quotas as temporary measures to get industrialization started.pExa
7、mple:The U.S.and Germany had high tariff rates on manufacturing in the 19th century,while Japan had extensive import controls until the 1970s.Import-Substituting IndustrializationoProblems with the Infant Industry ArgumentnIt is not always good to try to move today into the industries that will have
8、 a comparative advantage in the future.pExample:In the 1980s South Korea became an exporter of automobiles,whereas in the 1960s its capital and skilled labor were still very scarce.nProtecting manufacturing does no good unless the protection itself helps make industry competitive.pExample:Pakistan a
9、nd India have protected their heavy manufacturing sectors for decades and have recently begun to develop significant exports of light manufactures like textiles.oMarket Failure Justifications for Infant Industry ProtectionnTwo market failures are identified as reasons why infant industry protection
10、may be a good idea:pImperfect capital markets justificationnIf a developing country does not have a set of financial institutions that would allow savings from traditional sectors(such as agriculture)to be used to finance investment in new sectors(such as manufacturing),then growth of new industries
11、 will be restricted.pAppropriability argumentnFirms in a new industry generate social benefits for which they are not compensated(e.g.start-up costs of adapting technology).Import-Substituting IndustrializationoPromoting Manufacturing Through ProtectionnImport-substituting industrializationpThe stra
12、tegy of encouraging domestic industry by limiting imports of manufactured goodsnMany less-developed countries have pursued this strategy.nHas import-substituting industrialization promoted economic development?pMany economists are now harshly critical of the results of import substitution,arguing th
13、at it has fostered high-cost,inefficient production.Import-Substituting IndustrializationnWhy not encourage both import substitution and exports?pA tariff that reduces imports also necessarily reduces exports.pUntil the 1970s many developing countries were skeptical about the possibility of exportin
14、g manufactured goods.pIn many cases,import-substituting industrialization policies dovetailed naturally with existing political biases.Import-Substituting IndustrializationTable 2:Exports as a Percentage of National Income,1999Import-Substituting IndustrializationoResults of Favoring Manufacturing:P
15、roblems of Import-Substituting IndustrializationnMany countries that have pursued import substitution have not shown any signs of catching up with the advanced countries.pExample:In India,after 20 years of economic plans between the early 1950s and the early 1970s,its per capita income was only a fe
16、w percent higher than before.Import-Substituting IndustrializationnWhy didnt import-substituting industrialization work the way it was supposed to?pThe infant industry argument was not as universally valid as many people assumed.nImport-substituting industrialization generated:pHigh rates of effecti
17、ve protectionpInefficient scale of productionpHigher income inequality and unemploymentImport-Substituting IndustrializationImport-Substituting IndustrializationTable 3:Effective Protection of Manufacturing in Some Developing Countries(percent)EE Growth “出口扩张型增长”则指的是出口行业生产能力的增长超过其它行业，使得生产和出口都得到了进一步扩
18、张。SteelRiceExport-Oriented Industrialization:the East Asian MiracleoFrom the mid-1960s onward,exports of manufactured goods,primarily to advanced nations,was another possible path to industrialization for the developing countries.oHigh performance Asian economies(HPAEs)nA group of countries that ach
19、ieved spectacular economic growth.pIn some cases,they achieved economic growth of more than 10%per year.oThe Facts of Asian GrowthnThe World Banks definition of HPAEs contains three groups of countries,whose“miracle”began at different times:pJapan(after World War II)pThe four“tigers”:Hong Kong,Taiwa
20、n,South Korea,and Singapore(in the 1960s)pMalaysia,Thailand,Indonesia,and China(in the late 1970s and the 1980s)nThe HPAEs are very open to international tradepExample:In 1999,exports as a share of gross domestic product in the case of both Hong Kong and Singapore exceeded 100%of GDP(132 and 202 res
21、pectively).Export-Oriented Industrialization:the East Asian MiracleoTrade Policy in the HPAEsnSome economists argue that the“East Asian miracle”is the payoff to the relatively open trade regime.pThe data in Table 10-4 suggests that the HPAEs have been less protectionist than other less developing co
22、untries,but they have by no means followed a policy of complete free trade.pLow rates of protection in the HPAEs helped them to grow,but they are only a partial explanation of the“miracle.”Export-Oriented Industrialization:the East Asian MiracleTable 4:Average Rates of Protection,1985(percent)Export
23、-Oriented Industrialization:the East Asian MiracleoIndustrial Policy in the HPAEsnSeveral of the highly successful economies have pursued industrial policies(from tariffs to government support for research and development)that favor particular industries over others.nMost economists have been skepti
24、cal about the importance of such policies because:pHPAEs have followed a wide variety of policies,but achieved similarly high growth rates.pThe actual impact on industrial structure may not have been large.pThere have been some notable failures of industrial policy.Export-Oriented Industrialization:
25、the East Asian MiracleoOther Factors in GrowthnTwo factors can explain the rapid growth in East Asia:pHigh saving ratespRapid improvement in public educationnThe East Asian experience refutes that:pIndustrialization and development must be based on an inward-looking strategy of import substitution.p
26、The world market is rigged against new entrants,preventing poor countries from becoming rich.Export-Oriented Industrialization:the East Asian MiracleSmall and Large CountryGeographical Economic 1.Small Country:its share in world trade is too small to affect the international prices of the exported o
27、r imported goods 2.Large Country:its share in world trade is big enough to affect the international price of exports or importsIR Growth in a Small Country1.Relative Price:no change2.Production:rice reduce;steel increase3.Trade:Both reduce4.Welfare:Better offSteelIR GrowthRiceP1P2C1C2EE Growth in a
28、Small Country1.Relative Price:no change2.Production:rice increase;steel reduce 3.Trade:Both increase4.Welfare:Better offEE GrowthSteelRiceP1P2C1C2Summary(small country)oRybczyski Theorem(罗勃津斯基定理)：在商品相对价格不变的情况下，某种生产要素的增长会使密集使用该要素的商品生产扩大，使密集使用其他要素的商品生产缩小。Case Study:“Dutch Disease”oWhen the Netherlands
29、 developed natural gas fields under the North Sea in 1970s,a lot resources of the country were attracted to this industry.So that the manufacturing sector suffered.Similar problems happened in Britain,Norway,Australia,and Mexico.This case is usually called”Dutch Disease”oReason:nresources were attra
30、cted to gas industry because of higher profitsnExport of natural resource appreciationforeign demand for traditional exports reduced.IR Growth in a Large CountryoRelative price of steel dropoProduction:Steel increase Rice uncertainoTrade:UncertainoWelfare Better than small countrySteelRiceSmall coun
31、try Large country A B C EE Growth in a Large CountryoRelative price of steel UpoProduction:Rice increase Steel increaseoTrade:Export increase&import reduce oWelfare better than before-growth,but worse than small countrySteel Rice Small country Large country A B C A special case:Immiserizing Growth o
32、During the 1950s,some analysts argued that:the export-biased growth by poor nations would worsen their terms of trade so that they would be worse off than if they hadnt grown at all.This situation is known as“Immiserizing Growth”oExample：Latin American countries in 30sEconomic ModelThree conditions:
33、ostrong export-biased growth oLarge countryothe world demand for this product is inelastic.steelriceSummaryoH-O model interpret the role of resource in trade:Country tend to export goods that are intensity in the factor with which they are abundantly supplied.oEconomic growth affect small countries and large countries differently.
