ECON 333 – SPRING 2008
HOMEWORK ASSIGNMENT 1
For questions 2, 3, 4 and 6, consider a world with two goods: Chemicals and Textiles. Put
Chemicals on the horizontal axis in your figures.
1. Trade Partners (12 points)
WTO International Trade Statistics, 2007
. Based on pages 17 and 18 answer the
following questions for 2006:
What are the major differences between the EU trade partners and the US trade
partners? (List at least five.) Look both at the regional and at the economy level
EU trade partners are mostly concentrated within the European Union. In 2006, 67% of
total exports are within the EU region, compared with 7.3 % go into the USA, 2% go into
Russian and only 1% go into China. Similar trend can be found in imports where 64.2%
of total imports are from the European Union. Major trading partners are Turkey, Japan,
Norway, Romania and Canada.
For the USA, we see that most trade occurs with Canada, EU and Mexico. In 2006,
22.2% of total exports go into Canada, 20.7% go into EU and 12.9% go into Mexico,
while only 5.8% of exports go into Japan and 5.3% go into China. For imports, EU and
Canada remain major partners. China plays an important role in imports market where
15.9% of total imports are from China. Major trading partners are Canada, Mexico,
China, Korea, and India.
What could explain the differences you noted in a)?
For EU, the economic union and other trading agreements encourage and protect inter-
region trade. Similarly in the USA, North American Free Trade Agreement encourages
US to trade with Canada and Mexico.
Developed countries tend to trade with similarly developed countries where the business
environment is more hospitable. For example, developed countries tend to have better
contract enforcement institutions or better infrastructures for trade. Advanced and
developed business environment is one of the important reasons why trade occurs mostly
within the developed world.