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Trade Development Chapter With ToT
Trade Development Chapter With ToT
Why Trade?
Trade & Development – Does it Happen?
Nature of Trade Complexities in Developed vs.
Developing Economies
Trade Driven Welfare Gain
Free Trade vs. Protected Trade
Proposed that the countries maximize the difference between Exports &
Imports by promoting Export & Discouraging Imports.
Vacuum of the
Leads to Import of Leads to
Ex. Export product in domestic
the same goods price rise
Market
Australia 05 03
More Emphasized on
Capitalist Countries – Supply Chain of Factor
Capital Export
of Production
Labour Excess Countries – Hence, any change in
Labour Export
the supply conditions
Land Advantage
Countries – Agri. Exports
altered the trade
pattern it self.
Demand conditions
are equally important.
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Since absolute advantage is determined by a simple comparison
of labor productivities, it is possible for a country to have no
absolute advantage in anything.
Example-
India – Malaysia Trade Example
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It remains a major influence on much of international trade
policy and is therefore important in understanding the modern
global economy.
Other Theories
International
Trade Idea!
1. G = Mq ÷ Xq * 100 =
G = Gross Barter TOT
Import Quantity of that Year ÷ Imp G
N = Net Barter TOT
Price Index ÷ Export Quantity of that N
I = Income TOT
Year ÷ Export Price Index × 100 S = Single Factorial TOT I
D = Double Factorial TOT D
R = Real Cost TOT
2. N= Xp/Mp X 100 i.e. Export Price U = Utility TOT
Index divided by Import Price Index
Multiplied by 100 Ricardo’s Comparative
Advantage Model
3. I= NXq ( India’s N remains constant
for all countries). Hence it will be N These calculations shall
Multiplied by Export Quantity of provide the real time Terms of
that year divided by Export Price of Trade of any given country
that Year.
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Terms of Trade Calculation
Gross Barter ToT Net Barter ToT
G= Mq/Xq x 100. N=Xp ÷ Mp x 100 or
N= Only Export Price Index ÷ Only
However, when you collect data, you Import Price Index x 100
get monetized value of Import & or to get Xp & Mp use - Export Value
Export like – for Example - Index/Export Volume Index and
India’s Export to USA= US$250billion accordingly for Mp – Import Value
& Import may be US$320billion. Index/ Import Volume Index
Hence while calculating Mq/Xq use Or N= Export Value Index/Export
the method – Volume Index ÷ Import Value Index/
G= Mq/Xq or G= M/Mp ÷ X/Xp Import Volume Index
M=Import in monetized Value ÷
Import Price Index (Index is available Income Terms of Trade
in the net very easily)
Mp=Import Value Index ÷ Import I= NXq may accordingly be calculated.
Value Index
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Double Factorial ToT
D=NXz.
When Xz is a representation of Factor Productivity of a given
country and can be used as FPz also.
India’s D ToT with China= N India X FPz of India with USA ÷FPz China
with USA
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G ToT Scenario Analysis
1. Base YearY2000- G= Mq/Xq *100
Or 100/100*100= 100
G= Mq ÷ Xq * 100
=
i.e
2. Y2001 G= 96/100*100= 96 Import Quantity of that Year ÷
3. Y2002 G= 100/96*100= 104.16 Imp Price Index ÷ Export
Quantity of that Year ÷ Export
4. Y2003 G= 108/100*100= 108 Price Index × 100
5. Y2004 G= 108/80*100=135
6. Y2005 G=80/90*100= 88.88
7. Y2006 G= 114/112*100=101.78
3. ITC Website -
http://www.intracen.org/
India’s D ToT with China= N India X FPz of India with USA ÷FPz China
with USA
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Useful links
3. ITC Website -
http://www.intracen.org/
1 Kazakhstan 28 12 16
2 Kyrgyzstan 12 12 13
3 Tajikistan 10 08 02
4 Turkmenistan 05 05 00
5 Uzbekistan 10 09 01
Total 05 65 46 30 04
Source: https://aric.adb.org/fta-all
APPENDIX 1
Dataset of India's trade with Japan, Singapore, South Korea & Malaysia Y2000-2014
India-Japan India-Malaysia India-South Korea India-Singapore
Indian Indian Indian Indian Indian Indian Indian Indian
Year
Export* Import* Export* Import* Export* Import* Export* Import*
2000 2.15 2.24 0.714 1.72 0.978 1.1 0.961 1.56
2001 1.8 1.82 0.783 1.52 1.07 1.35 1.03 1.68
2002 1.69 1.82 0.679 1.76 1.22 1.4 1.03 1.57
2003 1.78 2.3 0.72 2.59 1.23 2.98 1.28 1.89
2004 2.09 2.87 1.17 2.86 1.85 3.78 2.46 2.62
2005 2.7 3.57 1.13 3.77 2.19 4.82 2.52 3.97
2006 3.48 4.35 1.37 4.73 3.59 5.21 4.7 5.15
2007 4.15 5.81 2.07 5.58 4.49 6.25 6.12 6.49
2008 5.15 7.46 3.14 7.12 6.35 8.57 8.81 7.4
2009 3.35 6.17 3.11 4.93 4.11 7.91 5.08 6.13
2010 5.31 8.21 2.59 5.99 5.42 10.7 8.66 7.34
2011 6.25 10.5 3.56 8.87 7.45 12.6 16 8.46
2012 6.39 11.2 3.77 9.51 6.57 13.1 12.4 7.79
2013 6.72 9.35 5.16 8.82 6.03 12 10.3 7.17
2014 6.36 8.38 4.44 10.5 5.13 12.9 8.08 7.02
CAGR 8.0548 9.8824 13.9441 13.7938 12.5674 19.2261 16.4258 11.3417
Pre RTA CAGR 9.463 13.870 13.752 13.290 17.295 24.508 26.489 13.840
Post RTA CAGR 0.583 -7.242 7.641 5.784 -1.365 4.786 13.821 6.538
100
50
35
30
Case of Large Trade
25
20
Volume Fluctuation
15
10
5
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2011
2012
2013
2014
50% India-CA
40% CA-Russia
30%
CA-China
20%
CA-India
10%
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: WITS
Source: https://data.worldbank.org/
65 RTAs
Signed
RTAs