CHAPTER 6 notes - The United States in the Global Economy...

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The United States in the Global Economy CHAPTER SIX THE UNITED STATES IN THE GLOBAL ECONOMY LECTURE NOTES I. Introduction A. Even on a wilderness backpacking trip, Americans are not leaving the world behind. Much of backpacking equipment may be imported, not to mention the vehicle used to arrive at the trail, the coffee they sip, etc. B. Many “American” products are made with components from abroad or are manufactured there. For example, the Chevrolet Lumina is made in Canada; the Gerber baby food company is owned by a Swiss company; Burger King is owned by a British corporation. The component parts of many “American” products are manufactured abroad. II. Linkages A. Several economic flows link the U.S. economy with the economies of other nations. B. These linkages are 1. Goods and services flows 2. Capital and labor (resource) flows 3. Information and technology flows 4. Financial flows III. U.S. and World Trade A. Volume 1. Table 6.1 gives an index of the importance of world trade to several countries, based on their exports relative to total output. 2. Figure 6.2 reveals the growth in U.S. imports and exports over past decades. Currently, exports and imports are 11 percent and 16 percent of GDP, respectively, which is more than double their importance of 25 years ago. 3. The U.S. is world’s leading trading nation measured in total volume of trade, but not relative to its GDP. The U.S. share of total world trade has diminished from a post- World War II level of one-third of total trade to one-eighth today. B. Dependence 1. U.S. depends on imports for many food items (bananas, coffee, tea, spices); raw silk, diamonds, natural rubber, much petroleum. 2. On the export side, agriculture relies on foreign markets for one-fourth to one-half of sales; chemical, aircraft, auto, machine tool, coal, and computer industries also sell major portions of output in international markets (see Table 6-2). C. Trade pattern 1. The U.S. has a trade deficit in goods. In 2002, U.S. imports exceeded exports of goods by $484 billion. 2. While we have a deficit in goods trade, U.S. export of services exceeds the import of services by $49 billion. 3. The U.S. imports some of the same categories it exports. Specifically, automobiles, computers, chemicals, and semiconductors. (See Table 6-2.) 90
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The United States in the Global Economy 4. Slightly more than half of U.S. trade is with industrially advanced countries. (See Table 6-3.) 5. Canada is the United States’ most important trade partner quantitatively. Twenty-four percent of U.S. exports went to Canadians, who in turn provided 18 percent of U.S. imports. (See Table 6-3.) 6. The U.S. has sizable trade deficits with Japan and China. In 2002, the U.S. trade deficit with Japan was $71 billion. The trade deficit with China is now larger than with Japan, at $101 billion in 2002. (See Table 6-3.) 7. In 2002, the U.S. imported $53 billion of goods (mainly oil) from OPEC nations, while exporting $18 billion to those countries.
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