International Trade

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“ International Trade and Foreign Direct Investment -
an economic analysis”

Table of Contents
1) Introduction 2
2) International Trade2
2.1 Major Flows & Trends 20102
2.1.1 Merchandise Exports2
2.1.2 GDP2
2.1.3 World Exports and Imports3
2.1.4 Leading Exporters & Importers4
2.1.5 Sectoral developments5
2.2 Explaining the Major Flows & Trends 20106
2.2.1 Absolute Advantage7
2.2.2. Comparative Advantage7
2.2.3 Hecksher and Ohlin 8
3) Foreign Direct Investment
3.1 Major Flows & Trends 20109
3.1.1 Different Performance in different regions10
3.1.2 Explaining the Major Flows & Trends 201011
3.1.3 Theories11
4) Conclusion14
5) References15

1) Introduction
International trade is “ The economic interaction among different nations involving the exchange of goods and services, that is, exports and imports” (Economic Glossary). In this assignment I want to review the major flows from country to country all over the world and what the trends are in recent years. 2) International Trade

2.1 Major Flows & Trends 2010
2.1.1 Merchandise Exports
In 2008 the world was hit hard by a financial crisis which the world suffers from, similar to the Great Depression. After this crisis the World didn’t recover yet fully. Banks released cheap Loans for purchasing new properties without ensuring if the borrowed money could be paid back. Concerning steadily raising property prices, banks increase their interest rates which caused the selling of the houses. After this, the property prices fell and mortgages lost their values, so companies’ investments are not profitable anymore. Due to this fact the trend went down. Nevertheless this was one factor, which cranked up the biggest increase in merchandise export, which was recorded in 2010 which shows an increase of nearly 15 per cent, kept up by an increase in global output by 3.6 per cent (Table1). Global supply chains are another factor added to the success of 2010 which raises world trade flows in contrast to earlier decades. (World Trade Report 2010) .

2.1.2 GDP
China was the leading country in GDP and merchandise Trade in 2010 with an annual percentage change of 10.3 per cent compared to the lowest GDP of 1.8 per cent of the European Union(27) (Table1). In contempt of the strong increases in China, Asia was the fastest growing developing country with 8.8 per cent followed by the fastest average rate GDP growth in Africa which shows an increase of 4.7 per cent in-between the year of 2005 till 2010. If we assemble the United States with Japan we can see a big difference in GDP growth. The United States were up to 2.8 per cent and Japan, up to 3.9 per cent. This is a massive boost if we consider that they had a huge drop of 6.3 per cent in 2009. (World Trade Report 2010) 2.1.3 World Exports and Imports

World Exports and Imports nearly increased at the same value. World Exports reached an increase of 14.5 per cent and World Imports worth 13.5. Usually these Exports should grow about twice as fast as GDP, but not in this case. In relation to GDP in 2010 with a value of 3.6 per cent, both Exports and Imports are nearly four times bigger. This unequal bounce back in output causes similarly outcome in Trade which shows a slowly growth in Imports of developed Economies compared to the Export (10.7 per cent Import & 12.9 per cent Export). The other way around happened in developing economies and CIS (17.9 per cent Import & 16.7 per cent in Export). (World Trade Report Table1)

2.1.4 Leading Exporters & Importers
China was the top leader in Export in 2010 with 10 per cent of the world exports which counts US$1.58 trillion, followed by the United States with 8 per cent of the world, US$1.28 trillion, which outdated Germany with US$1.27 trillion. It comes as no real surprise that the top leader in Imports are...
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