Trade Policies for theDeveloping Nations

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PowerPoint slides prepared by:Andreea ChiritescuEastern Illinois University

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Basic economic and social indicators for selected nations, 2007

TABLE 7.1

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Structure of output for selected advanced nations and developing nations, 2007

TABLE 7.2

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Developing nation dependence on primary products, 2007

TABLE 7.3

When the supply of a commodity is highly price-inelastic, decreases (or increases) in demand will generate wide variations in price. When the demand for a commodity is highly price-inelastic, increases (or decreases) in supply will generate wide variations in price.

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Export price instability for a developing nationFIGURE 7.1

They Face High Tariff Walls, Especially in Agricultural Commodities and Labor-Intensive Manufacturers© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password protected website for classroom use‐ 6

Trade barriers limit export opportunities of developing nations (a)

FIGURE 7.2

They Face High Tariff Walls, Especially in Agricultural Commodities and Labor-Intensive Manufacturers© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password protected website for classroom use‐ 7

Trade barriers limit export opportunities of developing nations (b)

FIGURE 7.2

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Tariffs of selected developing nations and advanced nations

TABLE 7.4

During periods of rising tin demand, the buffer-stock manager sells tin to prevent the price from rising above the ceiling level. However, prolonged defense of the ceiling price may result in depletion of the tin stockpile, which undermines the effectiveness of this price-stabilization tool and leads to an upward revision of the ceiling price. During periods of abundant tin supplies, the manager purchases tin to prevent the price from falling below the floor level. Again, prolonged defense of the price floor may exhaust the funds to purchase excess supplies of tin at the floor price and may lead to a downward revision of the floor price.© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password protected website for classroom use‐ 9

Buffer stock: price ceiling and price supportFIGURE 7.3

As a cartel, OPEC can increase the price of oil from $20 to $30 per barrel by assigning production quotas to its members. The quotas decrease output from 1,500 to 1,000 barrels per day and permit producers that were pricing oil at average cost to realize a profit. Each producer has the incentive to increase output beyond its assigned quota, to the point at which the OPEC price equals marginal cost. But if all producers increase output in this manner, there will be a surplus of oil at the cartel price, forcing the price of oil back to $20 per barrel.

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Maximizing OPEC profitsFIGURE 7.4

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World Bank lending by sector, 2008 (millions of dollars)

TABLE 7.5

During the 1980s and 1990s, developing nations that were more open to the international economy grew faster than those remaining more closed.

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Openness and economic growthFIGURE 7.5

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East Asian economies’ growth rates, 2006–2008TABLE 7.6