Increased Trading in a Global Market

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Increased Trading in A Global Market | | Thomas Edison State College International Management | Jacob Gold | 7/27/2012 |

International trade is a very important part of how businesses are done today. Two countries that use these practices often are China and India. They trade manufactured and labor intensive goods. This gives them an edge on the other countries they compete with in the global market. This paper first reviews some key features of China’s and India’s trade, in particular, the recent rapid export growth; the changing relative importance of goods and services; and the changing composition of exports within merchandise and services. With this as background, we use a global economy-wide modeling approach to take into account all of the potential impacts of a number of policy reforms and likely scenarios. First, the implications of the reforms under way in India are examined to see if they might result in greater competition between China and India. Then, we generate a baseline and examine the potential global implications of higher-than-expected growth rates in these two economies. We consider first the impact of more rapid economy-wide growth in China and India. We then examine the implications of two different types of growth, first growth focused on relatively sophisticated products, and subsequently growth driven by increased accumulation of physical and human capital. China’s and India’s trading patterns. Although it turns out that both have been quite successful in expanding their exports and imports, they have done this in very different ways. Broadly, China has relied primarily on exports of manufactures, frequently as part of an East Asian production sharing network. By contrast, India has concentrated more heavily on services. Within manufactures, China has relied heavily on exports of finished goods, while India has…...

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