This graphic came from an article entitled “Emerging Markets Fuel Export Growth” from the February 12th issue of The Wall Street Journal. The bands show the relative size of imports and exports from different countries at 3 points in time.
The real story is the huge increase in both imports and exports over the last 20 years. The secondary story – emphasized by the bright red shading – is the growth of imports from China.
Students also don’t have a decent idea of what we import and export, and the graphics accompanying the article spell that out a bit:
Notice that a lot of this is two-way trade: there are two classes of “refined products …” and two classes of cars is in the top 9 of both imports and exports. This is the sort of trade that could not be explained with the 3 traditional reasons: monopoly, concentration of factors (the Hecksher-Olin-Samuelson story of trade), or comparative advantage (Ricardo’s explanation). So in the late 1970’s, Paul Krugman pioneered a fourth explanation, based on increasing returns to scale and monopolistic competition. This theory comes up in Warsh’s book, and is also in part what Krugman won a Nobel Prize for.
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