Global Economy and Global Trade Lecture

Trade Complementarity Index

• Measures export and import compatibility between countries
• Scores range from 0 (no complementarity) to 100 (perfect match)
• Example: Chile's trade is more complementary with North America than Latin America

Concept of Comparative Advantage

• Countries with lower opportunity costs in producing specific goods/services
• Importance of specialization for efficiency and productivity
• Example: Specialization in creating AP Human Geography videos vs. car repair

Impact of Isolationist Policies

• Reduced efficiency and production when trying to be self-sufficient
• Benefits of trading to obtain goods/services without comparative advantage

Government Policies Affecting Trade

• Implementation of tariffs to encourage domestic production
• Tariffs increase prices of imported goods passed onto consumers
• Trade deficits occur when imports exceed exports

Neoliberalism and Global Trade

• Promoting free trade and reducing government intervention
• Organizations supporting globalization: WTO, IMF, Mercosur, EU, OPEC
• Free trade agreements like NAFTA/USMCA

Criticisms of Neoliberal Policies

• Prioritization of wealthier states and corporations
• Increase in economic inequality and reduced government oversight
• Competition between advanced and developing states

Global Interdependence and Crises

• Crises in one region impact the global community (e.g., 2008 financial crisis, COVID-19)
• Supply chain disruptions (e.g., Suez Canal blockage)