Chapter 1: Introduction to Economics of International Trade
Chapter 1 Introduction
Learning Objectives
After reading this chapter, you should be able to
- Define the term globalization and discuss its meaning and importance.
- Recognize international trade and finance as distinct parts of international economics.
- Explain the relationship between international trade and a nation’s standard of living.
- Use demand, supply, and markets to understand the basic theory of international trade.
Think About It!
Video: What Is Globalization?
Before reading this chapter, watch this video outlining the basic aspects of globalization.
Source: CFR Education. (2019, June 18). What is globalization? Understand our interconnected world [Video]. YouTube. https://youtu.be/wLNp3kgBuuQ?si=nA3VInntzN64ZzS6
Reflection Questions
Before we begin, we encourage you to reflect on the following questions:
- What are some aspects of globalization mentioned in the video that are new to you?
- Can you identify how you (or someone you know) have benefited from globalization?
- Can you think of ways in which you (or someone you know) have been hurt by globalization?
- Do you think that governments should limit the extent to which their countries are engaged with other countries economically and in other ways?
Introduction
In this chapter, we provide a brief overview of globalization. We highlight the significance of international economics as a lens through which we can examine the cross-border movement of goods and services and factors of production, a prominent feature of globalization. Specifically, we discuss international trade and international finance as distinct areas of study within international economics. Drawing on some key conclusions of international economics, we show the relationship between openness to international trade and finance and a country’s living standards. Last, we demonstrate how conventional demand and supply analysis helps us to understand how international trade and finance work, along with their expected benefits.
The video in the opening activity gives an orientation to the main aspects of globalization. It highlights the fact that the world is interconnected in many ways, including obvious ways, such as the movement of goods, resources, and ideas, as well as some not-so-obvious ways, such as the spread of diseases and financial crises. The video points out that globalization is not new, though some recent developments have increased its pace, scale, and scope. We also learn that globalization’s effects are not uniform: There are always winners and losers. It suggests that governments have a choice as to the extent to which their countries should be involved with other countries.
