Chapter 1
An Introduction to International Trade
This chapter provides an overview to the study of international economics and to the material covered
in this textbook. It offers an extensive discussion of real world data on the characteristics of the various
countries of the world, including their standards of living and the importance of international trade to their
economies. It also discusses various aspects of the nature of international trade in today’s world such as
the commodity composition of international trade and the direction of international trade flows.
The book includes considerable amounts of data, especially in this chapter. Students should be encouraged
to peruse this data—perhaps by challenging them to discover “interesting facts” or by giving them an
international trade IQ test—including questions such as which country is the world’s largest exporter, etc.
The chapter previews the Heckscher-Ohlin theory of trade flows in its discussion of U.S.-Japan trade
patterns. Students could be prompted to search through the tables for other examples of trade patterns that
have similar regularities to them. In urging students to look for and to attempt to explain these patterns,
one is laying a solid foundation for the theoretical work that will be developed in the chapters to come.
The data for Table 1.1 were taken from several tables found in the back of the World Development Report,
published for the World Bank by Oxford University Press. This volume contains many more tables of data
and is a useful source for many additional “box items” such as those that we have inserted throughout
the text. Note that we have included a column of data on PPP estimates of real GNP per capita. The
construction of these measures is aimed at providing better cross-country comparisons of standards of
living, and the differences between these levels and standard measures of GNP per capita are often quite
large. Another excellent source of data is the Handbook of International Trade and Development Statistics
2 Husted/Melvin • International Economics, Ninth Edition
1. Explain why neighboring countries tend to trade extensively with each other.
2. Use the information in text Tables 1.4 and 1.5 and your knowledge of the Mexican economy to
summarize and explain the trade pattern of Mexico.
Mexico is a large, developing country whose most important trading partner is the United States.
Because NAFTA provides Mexico with preferential access to U.S. markets, we should expect Mexico
to export products in high demand in the United States. In addition, because Mexico has significant
oil reserves, petroleum should be an important export. From Table 1.4, we see that Mexico’s exports
3. Find five interesting facts in Table 1.1.
Many answers are possible to this question. The following list represents an example of potential
answers.
a. From 1980 to 2009, the index of openness decreased on average for both low and middle income
countries, and slightly increased for high income countries. The latter group’s index remained the
highest.
Chapter 1 An Introduction to International Trade 3
4. Find five interesting facts in Tables 1.4 and 1.5.
Many answers are possible to this question. The following list represents an example of potential
answers.
a. The number one category of exports of almost every country listed is machines and transport
equipment.
5. Compare the export rankings of the top ten leading exports of 1999 to the rankings of the top ten
leading exports in 2010 (see Table 1.3). Discuss some of the reasons why these rankings have
changed so dramatically.
Crude petroleum was the fourth most important export in 1999 but has climbed back to the top #1
spot by 2010. This return of crude petroleum to the number one position was probably due to
6. Use Table 1.1 to find the five most open economies in 2009. How does the growth performance of
these countries compare with the growth of the average country in the table?
7. Use Table 1.4 to compare the structure of U.S. and Canadian exports. Comment on similarities and
differences. Are there any obvious reasons for the patterns you observe?
8. According to Figure 1.2, intra-European Union trade accounts for a huge proportion of EU trade.
What factor or factors might account for this fact?
9. According to Figure 1.2, the EU is a major customer of exports from Africa and the Middle East.
What types of products do you think these areas produce for export, and why do you think the EU is
their best customer?
10. Use Table 1.5 to compare and contrast the import patterns of China and Germany.