UNDERSTANDING THE DETERMINANTS OF INTERNATIONAL TRADE IN AFRICAN COUNTRIES: AN EMPIRICAL ANALYSIS FOR GHANA AND SOUTH AFRICA LAURA MÁRQUEZ-RAMOS Universitat Jaume I Instituto de Economía Internacional ABSTRACT There are clear economic differences between developed and developing countries that lead to a different behaviour among them in the determinants of bilateral trade flows. Although a number of authors have focused on the determinants of the trade patterns, further research is needed for a better understanding of what goods and with which countries developed and developing economies trade. This paper focuses on the determinants of international trade in African countries. From an empirical perspective, two African …show more content…
INTRODUCTION World trade has experienced an important increase in the last decades. Feenstra (1998) suggest several factors that explain this growth: Falling transport costs, trade liberalisation, economic convergence of countries and the increase of intermediate goods trade. In the same line, Baier and Bergstrand (2001) analyse what factors account for the growth of trade. Their results show that income growth, tariff rate reductions and lower transport costs have contributed to the growth of world trade. According to these authors, income growth explains 67% of the growth of trade, tariff reductions 25% and transport cost reductions 8%. These authors only use 16 OECD countries in the empirical analysis, and all of them are high-income countries. However, developed and developing countries face different economic characteristics and those play a different role in the growth of international trade. The main aim of this paper is to investigate the differences existing between two African economies, a developed (South Africa) and a developing country (Ghana), concerning the pattern and the direction of international trade flows to deal with three main questions: what goods, with which countries and how much these countries trade (Deardorff, 1984). The gravity model of trade is the empirical methodology most commonly used to analyse international trade flows determinants. When investigating why gravity works so well, Harrigan
The international trade sector of the U.S. economy continues to draw attention in economic and political circles. It is true that, the international market has become increasingly important as a source of demand for U.S. production and a source of supply for U.S. consumption. Indeed, it is substantially more important than is implied by the usual measures that relate the size of the international sector to the overall economy. This paper explores the role international trade now plays in the U.S. economy and answers the important questions for economic policy: How does international trade affect economic well-being? Who gains and who loses from free
Prior to unfolding of the events in the 18th century the interlinkages of increasingly global world, stirred agrarian and rural society's. In particular, the families had begun to produce surplus and buying new commodities, which were hitherto, considered luxuries. This era of industrious revolution laid the foundation for the industrial revolution. The trade in this time to Europe was mainly spices from India, silk and porcelain from China and inspite of silver flowing in from Americas kept the balance in favour of the East. The capital and labour requirements were not intensive and the mercantile activities were primarily housed in the guilds. This essay attempts to understand how the industrial revolution impacted the commerce
In September 11th- A National Tragedy, James Peck writes about how the tragic event, September 11th has affected our world today. Peck states that tragedy is a word that has commonly been overused by Americans throughout news articles and magazines when a significant event happens. When referring to September 11th, the crashing of the twin towers, this is a tragic event.
Imagine going about your everyday life when all of a sudden, you are taken away from your family, friends, and the life you know and you are placed aboard a ship going to a foreign place. On top of all that, you will have to work hard for free and be treated with almost no respect. It’s crazy right? Well not for the millions of Africans during the 15th to 19th century. The Atlantic Slave Trade was a part of the triangular trade which involved trading between Europe, Africa, and the Americas. The triangular trade was a trade system between the three continents which involved exchange of goods and slaves. The Europeans traded manufactured goods while the Africans traded slaves and the Americans traded for agricultural products. In all of this, the question arises that who is to blame? The blame can’t be placed on only one group of people because each group has played a big role in the slave trade. By looking at what was the role of each continent in the slave trade, we can see how much they are to blame.
Nevertheless, A Splendid Exchange, is a very informative book that shows how trade has shaped the world in which we live in today. Mr. Bernstein uses many effective sources to support his thesis and effectively communicates his ideas to the reader. At times the book seemed to drag on from a lack of enthusiasm. That being said, this book was still very educational and
Which is cost difference determines the patterns of international trade. Absolute advantage is trade benefits when each country is at least cost producer of one of the goods being traded. In the 1800s, David Ricardo developed the theory of comparative advantage to measure gains from trades. This theory is based on comparative advantage and it states each nation should specialize in production of those goods for which its relatively more efficient with a lower opportunity cost.
International trade is defined as trade between two or more partners from different countries in the exchange of goods and services. In order to understand International trade, we need to first know and understand what trade is, which is the buying and selling of products between different countries. International Trade simply is globalization of the world and enables countries to obtain products and services from other countries effortlessly and expediently.
Free trade has long be seen by economists as being essential in promoting effective use of natural resources, employment, reduction of poverty and diversity of products for consumers. But the concept of free trade has had many barriers to over come. Including government practices by developed countries, under public and corporate pressures, to protect domestic firms from cheap foreign products. But as history has shown us time and time again is that protectionist measures imposed by governments has almost always had negative effects on the local and world economies. These protectionist measures also hurt developing countries trying to inter into the international trade markets.
Trade, not aid, is the key to economic growth in developing countries. To what extent do you agree with this statement?
The new trade theory began to emerge in the 1970s when a number of economists pointed out that the ability of firms to attain economies of scale might have important implications for international trade (Wickramasekera, Cronk & Hill 2013). This theory is based on two major concepts that are economies of scale and first-mover advantage. To elaborate:
Mercantilism was a sixteenth-century economic philosophy that maintained that a country's wealth was measured by its holdings of gold and silver (Mahoney, Trigg, Griffin, & Pustay, 1998). This recquired the countries to maximise the difference between its exports and imports by promoting exports and discouraging imports. The logic was transparent to sixteenth-century policy makers-if foreigners buy more goods from you than you buy from them, then the foreigners have to pay you the difference in gold and silver, enabling you to amass more treasure. With the treasure acquired the realm could build greater armies and navies and hence expand the nation’s global influence.
The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. The goal is to help producers of goods and services, exporters, and importers conduct their business. The World Trade Organization came into being in 1995. One of the youngest of the international organizations, the WTO is the successor to the General Agreement on Tariffs and Trade (GATT) established in the wake of the Second World War. The World Trade Organization exists to ensure that trade between nations flows as smoothly, predictably and freely as possible. It provides and regulates the legal issues which governs world trade now .
Global Trade is one of an essential activity that undertakes between two nations in a modern world (Buckley & Casson, 2016). It can be accessed not only by a wide range of product or service market but also accompanies competition through competitive advantage even though it is between countries like New Zealand and Australia. The international trade in these countries accompanies a total of 20-30% of GDP. However, the future growth rate of Australia and New Zealand is strong and opts to increase economic nationalism through the continuous balancing of policies, globalization and technology.
Adam Smith outlined that the price mechanism in international trade is like an ‘invisible hand’ that coordinates the consumption and production decisions in a well-functioning market economy (Kerr and Gaisford 2007). However, there is need for the government to intervene in free market economies in order to implement trade regulations and avoid market failure that is associated with negative externalities. International trade is affected by government’s interventions that include direct participation in supply and purchase of essential goods and services, through regulation, taxation and other indirect participation influences. The free markets enhance market efficiency through ensuring that prices are determined by the