Session 1Scarcity of Resources
©2000, JELD-WEN, inc. Thinking Economics is a trademark of JELD-WEN, inc. Klamath Falls, OR

Case Study 13.1e_02 "Economics in the Western Hemisphere"

Directions: Complete the following case study and record your answers on a separate sheet of paper.

Topic: Economic comparisons among nations in the Western Hemisphere. Data focuses on gross domestic product (GDP), GDP per capita, population and international trade.

Objective: Understand the relationship of population to GDP and the importance of international trade. Obtain knowledge on trade and trading patterns within the Western Hemisphere. Understand the limits of specialization, the importance of the trend toward global interdependence.

Key Terms: international trade gross domestic product (GDP)
GDP per capia European Union (EU)
import export
 
Careers: economist political scientist
 
Web Site Links: http://www.icg.org/intelweb/commerce.html
http://www.ita.doc.gov/legal/
http://plasma.nationalgeographic.com/mapmachine/
 

Case Study:

The following chart shows the nations in the Western Hemisphere with various economic and trading information. It is sorted by the nation's GDP, from highest to lowest. Review the chart and then move on to the rest of the case study following.

 

Nation: Area size in sq. km (actual)

Estimated population (in millions)

GDP (in billions)

GDP per capita (actual)

Exports (in billions)

Main export trading partners

Imports (in billions)

Main import trading partners

United States: 9,629,091

275.56

$9,255

$33,900

$663: capital goods, automobiles, industrial supplies and raw materials, consumer goods, agricultural products

Canada 23%, Mexico 12%, Japan 8%, U.K. 6%, Germany 4%, France 3%, Netherlands 3%

$912: crude oil and refined petroleum products, machinery, automobiles, consumer goods, industrial raw materials, good and beverages

Canada 19%, Japan 13%, Mexico 10%, China 8%, Germany 5%, U.K. 4%, Taiwan 4%

Brazil: 8,511,965

172.86

$1,057

$6,150

$46.9: manufactures, iron ore, soybeans, footwear, coffee

U.S. 18%, Argentina 13%, Germany 5%, Netherlands 5%, Japan 4%

$48.7: machinery and equipment, chemical products, oil, electricity

U.S. 23%, Argentina 12%, Germany 10%, Japan 5%, Italy 5%

Mexico: 1,972,550

100.35

$865.50

$8,500

$136.8 (includes assembly plant operations with links to U.S. companies): manufactured goods, oils and oil products, silver, coffee, cotton

U.S. 89.3%, Canada 1.7%, Spain 0.6%, Japan 0.5%, Venezuela 0.3%, Chile 0.3%, Brazil 0.3%

$142.1 (includes assembly plant operations with links to U.S. companies): metal-working machines, steel mill products, agricultural machinery, electronical equipment, car parts for assembly, repair parts for motor vehicles, aircraft and aircraft parts

U.S. 74.8%, Germany 3.8%, Japan 3.5%, Canada 1.9%, South Korea 2%, Italy 1.3%, France 1%

Canada: 9,976,140

31.28

$722.30

$23,300

$277.0: motor vehicles and parts, newsprint, wood pulp, timber, crude petroleum, machinery, natural gas, aluminum, telecommunications equipment, electricity

U.S. 48%, Japan 3%, U.K., Germany, South Korea, Netherlands, China

$259.3: machinery and equipment, crude oil, chemicals, motor vehicles and parts, durable consumer goods, electricity

U.S. 77%, Japan 3%, U.K., Germany, France, Mexico, Taiwan, South Korea

Argentina: 2,766,890

36.95

$367

$10,000

$23: edible oils, fuels and energy, cereals, feed, motor vehicles

Brazil 24%, EU 21%, U.S.11%

$25: machinery and equipment, motor vehicles, chemicals, metal manufactures, plastics

EU 23%, U.S. 22%, Brazil 21%

Colombia: 1,138,910

39.68

$245.10

$6,200

$11.5: petroleum, coffee, coal, gold, banana, cut flowers

U.S. 39%, EU 24%, Andean Community 15%, Japan 2%

$10.0: industrial equipment, transportation equipment, consumer goods, chemicals, paper products, fuels, electricity

U.S. 35%, EU 20%, Andean Community 15%, Japan 7%

Chile: 756,950

15.15

$185.1

$12,400

$15.6: copper, fish, fruits, paper and pulp, chemicals

EU 27%, U.S. 16%, Japan 14%, Brazil 6%, Argentina 5%

$13.9: consumer goods, chemicals, motor vehicles, fuels, electrical machinery, heavy industrial machinery

U.S. 24%, EU 23%, Argentina 11%, Brazil 6%, Japan 6%, Mexico 5%

Venezuela: 912,050

23.54

$182.8

$8,000

$20.9: petroleum, bauxite and aluminum, steel, chemicals, agricultural products, basic manufactures

U.S. and Puerto Rico 57%, Colombia, Brazil, Japan, Germany, Netherlands, Italy

$11.8: raw materials, machinery and equipment, transport equipment, construction materials

U.S. 53%, Japan, Columbia, Italy, Germany, France, Brazil, Canada

Peru: 1,285,220

27.01

$116.00

$4,400

$5.9: fish and fish products, copper, zinc, gold, crude petroleum and byproducts, lead, coffee, sugar, cotton

U.S. 25%, China 8%, Japan 7%, Switzerland, Germany, UK, Brazil

$8.4: machinery, transport equipment, foodstuffs, petroleum, iron and steel, chemicals, pharmaceuticals

U.S. 19%, Colombia 6%, Venezuela 5% Chile 4%, Brazil 4%

Ecuador: 283,560

12.92

$54.50

$4,300

$4.1: petroleum, bananas, shrimp, coffee, cocoa, cut flowers, fish

U.S. 39%, Columbia 7%, Italy 6%, Peru 5%, Chile 3%

$2.8: machinery and equipment, raw materials, fuels, consumer goods

U.S. 39%, Colombia 11%, Japan 9%, Venezuela 5%, Mexico 3%

Guatemala: 108,890

12.64

$47.90

$3,900

$2.4: coffee, sugar, bananas, fruits and vegetables, meat, apparel, petroleum, electricity

U.S. 48%, El Salvador 10%, Honduras 6%, Germany 5%, Costa Rica 4%

$4.5: fuels, machinery and transport equipment, construction materials, grain, fertilizers, electricity

U.S. 46%, Mexico 13%, El Salvador 5%, Venezuela 5%, Japan 4%

Dominican Republic: 48,730

8.40

$43.7

$5,400

$5.1: ferronickel, sugar, gold, silver, coffee, tobacco, meats

U.S. 61.6%, Belgium 11.1%, Asia 5.9%, Canada 2.9%

$8.2 : foodstuffs, petroleum, cotton and fabrics, chemicals and pharmaceuticals

U.S. 56%, Venezuela 23%, Mexico 9%, Japan 4%

Uruguay: 176,220

3.30

$28

$8,500

$2.1: meat, rice, leather products, vehicles, dairy products, wool, electricity

Mercosur partners 45%, EU 20%, U.S. 7%

$3.4: road vehicles, electrical machinery, metal manufactures, heavy industrial machinery, crude petroleum

Mercosur partners 43%, EU 20%, U.S. 11%

Costa Rica: 51,100

3.71

$26.00

$7,100

$6.4: coffee, bananas, sugar, corn, rice, beans, potatoes, beef, timber

U.S. 49%, EU 22%, Central America 10%

$6.5: raw materials, consumer goods, capital equipment, petroleum, electricity

U.S. 41%, Japan 8.1%, Mexico 7.3%, Venezuela 4%

Bolivia: 1,098, 580

8.15

$24.20

$3,000

$1.1: soybeans, natural gas, zinc, gold, wood

U.K. 16%, U.S. 12%, Peru 11%, Argentina 10%, Colombia 7%

$1.6: capital goods, raw materials and semi-manufactures, chemicals, petroleum, food

U.S. 32%, Japan 24%, Brazil 12%, Argentina 12%, Chile 7%, Peru 4%, Germany 3%

Panama: 78,200

2.80

$21.00

$7,600

$4.7: bananas, shrimp, sugar, coffee

U.S. 40%, Sweden, Costa Rica, Spain, Benelux, Honduras

$6.4: capital goods, crude oil, foodstuffs, consumer goods, chemicals

U.S. 40%, Central American and Caribbean, Japan

Paraguay: 406,750

5.58

$19.90

$3,650

$3.1: soybeans, feed, cotton, meat, edible oils

Brazil, Argentina, EU

$3.2: road vehicles, consumer goods, tobacco, petroleum products, electrical machinery

Brazil 34%, U.S., Argentina, EU, Uruguay, Hong Kong

Cuba: 110,860

11.14

$18.60

$1,700

$1.4: sugar, nickel, tobacco, shellfish, medical products, citrus, coffee

Russia 25%, Netherlands 23%, Canada 16%

$3.2: petroleum, food, machinery, chemicals

Spain 16%, Venezuela 15%, Mexico 7%

El Salvador: 21,040

6.12

$18.10

$3,100

$2.5: offshore assembly exports, coffee, sugar, shrimp, textiles, chemicals, electricity

U.S. 59%, Guatemala 12%, Germany 6%, Costa Rica 4%, Honduras

$4.15: raw materials, consumer goods, capital goods, fuels, foodstuffs, petroleum, electricity

U.S. 51%, Guatemala 9%, Mexico 6%, Japan 3%, Costa Rica

Honduras: 112,090

6.25

$14.10

$2,050

$1.6: coffee, bananas, shrimp, lobster, meat, zinc, lumber

U.S. 73%, Japan 4%, Germany 4%, Belgium, Spain

$2.7: machinery and transport equipment, industrial raw materials, chemical products, fuels, foodstuffs

U.S. 60%, Guatemala 5%, Netherlands Antilles, Japan, Germany, Mexico, El Salvador

Nicaragua: 129,494

4.81

$12.50

$2,650

$0.57: coffee, shrimp and lobster, cotton, tobacco, beef, sugar, bananas, gold

U.S. 35%, Germany 13%, El Salvador 10%, Spain 4%, Costa Rica 4%, France 2%

$1.50: machinery and equipment, raw materials, petroleum products, consumer goods

U.S. 31%, Costa Rica 11%, Guatemala 8%, Venezuela 6%, El Salvador 5%, Mexico 4%

Trinidad and Tobago: 5,128

1.17

$9.41

$8,500

$2.4: petroleum and petroleum products, chemicals, steel products, fertilizer, sugar, cocoa, coffee, citrus, flowers

U.S. 36.9%, Caricom countries 29.4%, Central and South America 9.7%, EU 6.3%

$3: machinery, transportation equipment, manufactured goods, food, live animals

U.S. 44%, Latin America 18.9%, EU 13.7%, Japan 4.8%

Haiti: 27,750

6.87

$9.20

$1,340

0.32: manufactures, coffee, oils, mangoes

U.S. 86%, EU 11%

$0.76: food, machinery and transport equipment, fuels

U.S. 60%, EU 12%

Jamaica: 10,990

2.65

$8.80

$3,350

$1.4: alumina, bauxite, sugar, bananas, rum

U.S. 39.5%, EU 15.6, U.K. 12.1%, Canada 11.5%

$2.7: machinery and transport equipment, construction materials, fuel, food, chemicals, fertilizers

U.S. 50.9%, EU 9.5%, Caricom nations 10.4%, Latin America 6%

The Bahamas: 13,940

0.29

$5.58

$20,000

$0.36: pharmaceuticals, cement, rum, crawfish, refined petroleum products

U.S. 22.3%, Switzerland 15.6%, U.K. 15%, Denmark 7.4%

$1.74: foodstuffs, manufactured goods, crude oil, vehicles, electronics

U.S. 27.3%, Italy 26.5%, Japan 10%, Denmark 4.2%

Barbados: 430

0.27

$2.90

$11,200

$0.21: sugar and molasses, rum, other foods and beverages, chemicals, electrical components, clothing

U.K. 14.8%, U.S. 11.6%, Trinidad and Tobago 7.6%, Venezuela 6.1%, Jamaica 5.8%

$1.01: consumer goods, machinery, foodstuffs, construction materials, chemicals, fuel, electrical components

U.S. 30.7%, Trinidad and Tobago 10.2%, Japan 8.3%, U.K. 7.7%, Canada 2.2%

Guyana: 214,970

0.69

$1.86

$2,500

$0.57: sugar, gold, bauxite/alumina, rice, shrimp, molasses, rum, timber

U.S. 25%, Canada 24%, U.K. 19%, Netherlands Antilles 11%, Jamaica 5%

$0.62: manufactures, machinery, petroleum, food

U.S. 28%, Trinidad and Tobago 21%, Netherlands Antilles 14%, U.K. 7%, Japan 5%

Suriname: 163,270

0.43

$1.48

$3,400

$0.40: alumina, aluminum, crude oil, lumber, shrimp and fish, rice, bananas

Norway 24%, Netherlands 23.8%, U.S. 21%, France 7.3%, Japan 4.9%, U.K.

$0.46: capital equipment, petroleum, foodstuffs, cotton, consumer goods

U.S. 31.2%, Netherlands 17.3%, Trinidad and Tobago 16.1%, Japan 4.3%, U.K. 4%, Brazil

French Guiana: 91,000

0.17

$1

$6,000

$0.15: shrimp, timber, gold, rum, rosewood essence, clothing

France 62%, Switzerland 7%, U.S. 2%

$0.62: food, machinery and transportation equipment, fuels and chemicals

France 52%, U.S. 14%, Trinidad and Tobago 6%

Belize: 22,960

0.25

$0.74

$3,100

$0.15: sugar, bananas, citrus fruits, clothing, fish products, molasses, wood

U.S. 45.5%, U.K, 30%, EU 10%, Caricom nations 4.2%, Mexico 3.4%, Canada 3.3%

$0.32: machinery and transportation equipment, manufactured goods, food, fuels, chemicals, pharmaceuticals

U.S. 52%, Mexico 13%, U.K. 5%

Saint Lucia: 620

0.16

$0.66

$4,300

$0.75: bananas, clothing, cocoa, vegetables, fruits, coconut oil

U.K. 50%, U.S. 24%, Caricom nations 16%

$2.90: food, manufactured goods, machinery and transportation equipment, chemicals, fuels

U.S. 36%, Caricom nations 22%, U.K. 11%, Japan 5%, Canada 4%

Antigua and Barbuda: 442

0.07

$0.52

$8,200

$0.04: petroleum products, manufactures, machinery and transport equipment, and food and live animals

OECS 26%, Barbados 15%, Guyana 4%, Trinidad and Tobago 2%, U.S. 0.3%

$0.33: food and live animals, machinery and transportation equipment, manufactures, chemicals and oil

U.S. 27%, U.K. 16%, Canada 4%, OECS 3%

Grenada: 340

0.09

$0.36

$3,700

$0.03: bananas, cocoa, nutmeg, fruit and vegetables, clothing, mace

Caricom nations 32%, U.K. 20%, U.S. 13%, Netherlands 8.8%

$0.20: food, manufactured goods, machinery, chemicals, fuel

U.S. 31.2%, U.K. 20%, U.S. 13%, Japan 7.1%

Dominica: 754

0.07

$0.22

$3,400

$0.06: bananas, soap, bay oil, vegetables, grapefruit, oranges

Caricom nations 47%, U.K. 36%, U.S. 7%

$0.12: manufactured goods, machinery and equipment, food, chemicals

U.S. 41%, Caricom nations 25%, U.K. 13%, Netherlands, Canada

MEDIAN Statistics

24

393

72,000

CS Question #1: Was there any data that surprised you or caught your attention? If so, what was it and why did it draw your attention? If not, explain why not?


The following shows the top six nations with the highest GDP, GDP per capita and population:

Ranking GDP
(highest is #1)
GDP GDP per capita Population

1.

United States United States United States

2.

Brazil Canada Brazil
3. Mexico The Bahamas Mexico
4. Canada Chile Columbia
5. Argentina Barbados Argentina
6. Columbia Argentina Canada

 

Notice that some nations show up in multiple categories. For instance, the list of highest GDP and highest population is remarkably similar. Therefore, a correlation can be made between population and how much a nation can produce. However, the nations in the highest GDP per capita do not match up as clearly to GDP or population. Let's take a further look at The Bahamas, Chile and Barbados.


The Bahamas' and Barbados' economies are built around tourism and international banking. The Bahamas' also has a high level of investment management. Barbados has a large amount of offshore financing. These lucrative industries provide higher incomes, accounting for the high GDP per capita of these nations. You can see by the chart above that their population and amount of trade is considerably low. The lack of industry and resources (including human labor resources) for durable trade limits the overall GDP of The Bahamas and Barbados.


Chile's high GDP per capita can be linked back to 1990 change to a democratic representative government and free market economic system. These changes created rapid growth for Chile. Chile has the seventh highest GDP of the Western Hemisphere and the ninth highest population. If you review its export to import ratio, you will see that Chile total export dollar value is higher than its total import dollar value, creating a trade surplus. These factors influence the high GDP per capita of Chile.

CS Question #2: Did you notice that the United States is the highest in all three categories? Why do you think that is?

 


The main import and export trading partners for nations in the Western Hemisphere are other nations within the Western Hemisphere. Notable exceptions are Japan and the European Union (especially the United Kingdom). One main reason is proximity or how close nations are to each other. It is easier and less expensive to distribute goods and services among shorter distances and existing trade routes. Further, many of these nations have long standing trade relationships. It is important to note that chart above does not show every nation that is importing and exporting with each other, only the main nations. As we move closer and closer to a global economy nations will be less dependent on specific nations for trade. Instead the global economy will be interdependent among all nations. New technology, including the Internet, the World Wide Web will improve the speed and cost of trading among large distances.

CS Question #3: Is it important for nations to move toward global trade? Why or why not?

 


More developed nations tend to export other industrial goods and services in addition to agricultural ones. While less developed nations tend to export more agricultural goods. Further, many nations growing towards an industrial or service economy import items that will help this growth. Review the chart above for an illustration of these concepts. Notice how nations with higher GDPs import technology in the form of equipment and machines. While nations lower GDPs import more food and manufactured goods. Nations with lower GDPs also import machines and equipment, but at a much lower rate.


Some nations clearly specialize in resources specific to the nation. Review the chart above. Notice the nations that indicate general items, versus those that list specific items like coffee, sugar, nickel, molasses. Specialization can help a nation to capitalize on trade. Nations that can specialize will enjoy a comparative advantage over other nations. Specialization increases efficiency and output. This is beneficial to the consumer. However, specialization may interfere with the diversification of nation's economy. Specialization will always be limited by the size of the market for the particular good or service. Eventually this could negatively effect the nation's economy. Nations with higher GDPs do not rely on specialization. They have the comparative advantage of larger resources, mass production and distribution to compete in international trade.

CS Question #4: What ways can a developing nation obtain comparative advantage? Try to think of three examples.

 


Further Thought:

  1. Review the chart above. Notice how many nations have 30 percent or higher divisions of their trade with the United States. Yet the United States may not even show them as a main trading partner, or show them at a much smaller division of trade. Why do you think that is?
  2. Review Mexico's data on the chart above. Notice the mention of assembly plant operations with links to U.S. companies? How do you think this effects Mexico's GDP?
  3. Now that you've analyzed the chart's data more completely, review you answer to the first question again. Do you still agree with your first impression? Is there anything you would add or change about your answer?


Data Source: CIA World Factbook

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©2000, JELD-WEN, inc. Thinking Economics is a trademark of JELD-WEN, inc. Klamath Falls, OR