Please answer correct! The question is in details.?
Answer:
In just a few words countries like the US and Japan have very large industries in general so the reason why it such a small percentage could be for the following reasons:
a) their economies are very large so the actual bulk of trade in terms of income is going to be larger
b) the bigger the economy the greater the fear of trade by companies because there is a greater range of products that the economy covers hence a greater need for protectionism as the economy has spread its resources to so many sectors
c) NICs can only develop through trade because their markets are too small to enable them to develop just by selling produce locally which is a problem that the US and Japan dont have as there are big healthy markets
Well I'll take a stab at what you are looking for but the question is so poorly phrased and asked I'm really not sure what it is you want to know.
First off seperate GDP from trade. GDP is a measure of an economys size that only considers consumer spending, business spending and government spending. It does not measure trade at all.
To get a measure of an economy with trade included you have to use GNP which is made up of the same components as GDP and one more item. The additional item is net exports, which is exports minus imports. If imports are greater than exports, the net export number is negative and reduces the size of the economy as measured.
This is why GDP is generally used now instead of GNP. It gives a better approximation of an economys true doemstic size. It's a more bit complicated than I just stated but I'm not into writing a book tonight and that is the basic idea.
All that being said, leads me to believe the question you are trying to ask is: Why is the value of goods in trade of the U.S. and Japanese economies equal to only about 20% of their respective GDP's, where some of these NIC's have a value of goods in trade that is more than 20% of their GDP's.
Saying that I'm not sure that those stated values of goods in trade is accurate I'll answer assuming they are. The Nic's percentage is higher because the size of their economies is smaller than those of the US and Japan.
Example, (simplified numbers), If the U.S. economy, (GDP) is 100 dollars and the value of goods in trade is 20 dollars then our % of trade is 20% of GDP.
If the S. Korean GDP/economy is 20 dollars, and the value of goods in trade is 10 dollars, then their % of trade is 50% of GDP.
Our trade value as a percentage of GDP is less than theirs. However our economy is much larger. It is easier for any component of an economy to have a greater % impact in a smaller economy than in a larger one.
Compare this concpet to baseball's batting average. The more at bats you have the less your avg changes if you get a hit in any one at bat.
US is the most developed economy followed by China, then Japan being 3rd. Although in terms of technological economy, japan is 2nd to USA.
The definition of GDP
GDP is the most important current measure of our Nation's economic performance. GDP is a measure of the total market value of all final goods and services produced in our country during any quarter or year. GDP equals total consumer spending, business investment, and government spending and investment, plus the value of exports, minus the value of imports.
If you are saying that the figures you saw in the GDP reports of both country accounts only to 20% of their GDP, This is relatively high, you have to remember it is EXPORT less IMPORTS. Which of the two did you take up to come up with the 20% you were mentioning? Japan for example has a GDP of $4.88 trillion, Export at $590B and IMport at $524B, Combined ex and im, it would account to about 22% of the GDP but still it is an inaccurate observation.
A country imposes restrictions on either imports or exports to balance trade, to protect local producers and manufacturers, to protect its citizens etc etc. To compare US China and Japan to that of Malaysia, Singapore in terms of trade, is a little difficult, you said it yourself, NIC vs DEVELOPED. NIC tends to open their market so they can have a chance to sell their goods (bi-lateral trade) where as developed countries often time are protecting their economy thats why US has import quotas where in NIC or "poor" countries bid to get a part of this quota. Japan and korea at one time, urged the importation of raw materials and restricted the entry of consumer products.
Maybe you are not referring to GDP, as GDP is already a measure of an economy, meaning its after the fact. It is performance, a performance to be measured it has to be performed first.
It is tough to answer correctly this question as the question itself has some contradictions.
In some countries such as Malaysia, the ratio of exports to GDP is more than 100%. How can that be? A country can't export more than it produces.
In fact, what should be compared is the domestic value added of exports to GDP. This is the value of the exports minus the value of any imports used to produce the exports. If domestic value added of exports is low, the total value of exports can exceed GDP.
To take an extreme example, suppose Malaysia manufactures computers. However, it imports most of the components (hard drive, memory, processor) and only puts the components together. The total dollar amount of exports would be quite high but the domestic value added would be small.
I think that the reason that the ratio of exports to GDP is high in the East Asian NICs is that the domestic value added of their exports is less than the US and Japan. If you looked at the ratio of export value added to GDP, the ratios might be similar.
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