Assignment 1- S369070 (Kenan Altiparmak)

• Due 9 Aug by 23:59 Points 25 Submitting a file upload File types doc, docx,
and pdf

Course Name: International Trade Course Code: ECON1086 Weight: 25% Due date: FRIDAY WEEK 3 (August 9) AT MIDNIGHT

Understand how to use data in practical analysis and learn how to write brief reports and
policy briefs.

This assessment is linked to the following Course Learning Objectives (CLOs):

• Manipulate economic models to analyse real world issues in international trade.

• Analyse the fundamental determinants of the size and pattern of trade to verify its
determinants and its effects on the wider economy/welfare.
• Compare and contrast economic and political conditions in poor and rich countries
to critically assess the incentives and consequences of trade liberalisation globally.
• Assess the impact of protectionist policies on the welfare in rich and poor countries
to decrypt the political economy of trade reform.

Details:
To answer the assignment questions first get the data follow these steps.

1. This assignment requires you to obtain data from two (2) countries of your
choosing over the period 1985-2005.
2. Obtain country-level data on trade (% GDP) and GDP per capita from the World
Bank’s World Development Indicators
(http://databank.worldbank.org/data/source/world-development-indicators (Links
to an external site.)

3. DO NOT attach Excel files to the assignment.

4. Keep explanations brief. Policy analysis in applied economics has to be brief. Be
precise and to the point, avoid jargon.

CHECKLIST:
- Student states the sign of the correlation coefficeint and what this means. Student makes a
note of causality between the variables of interest. Causality inferred from correlations is
interpreted correctly. The finding is explained in terms of economic theory, as discussed in the
lecture notes.
- Both graphs properly labelled. Axes have been labelled. Data on both axes is easy to read.
Graphs can be understood without referring to the text.
- Lists other examples of how globalisation can be measured in economics.
- Explanation briefly discusses trends in both graphs, comparing the two countries.
- Student states the sign of the correlation coefficeint and what this means. Student makes a
note of causality between the variables of interest. Causality inferred from correlations is
interpreted correctly. The finding is explained in terms of economic theory, as discussed in the
lecture notes.
- Students discuss at least two general factors that can drive openness within the context of
each economy. References are used carefully.

Questions:
*** Follow the instructions above on how to get the data.

*** Read Chapter 1 and/or the notes from Lecture 1 very carefully.

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1. In approximately 150 words, describe the economic background of these countries.

What region are they in, what do they export, are they rich or poor? (5 marks)

Turkey is defined as an emerging market economy (IMF, 2019), it is the 27th largest export
economy in the world, it is a relatively large & affluent economy located in western Asia and the
middle east, it is also self-sufficient with food. (OECD, 2019)

Turkey is ranked 19th in GDP rank, the currency is Turkish Lira (₺) (OECD, 2019). Turkeys
location in Western Asia and the Middle East, is a politically volatile region which also impacts its
economy due to warfare.

Turkeys main nations that they export to are the UK and Germany. Main exports of Turkey are cars
($13.2B), Gold ($6.96B) and trucks ($5.04B) (OECD, 2019)

East Asian Vietnam shifted from a centrally planned economy to a free market economy in 1986.
Vietnam is not a ‘poor nation’, it is considered a ‘middle income economy’ (World Bank, 2010)

Their main exports are broadcasting equipment ($30.7B), telephones ($14.9B) & integrated circuits
($14.6B), main export locations are the US ($46.2B) and China ($39.9B) Vietnam is the 45th
largest economy in the world. (OECD, 2019) The currency used is Vietnamese Dong (₫).

2. In approximately 200 words, explain what type of globalization does trade/GDP (also
called openness) measure. Are there other measures you could have used? Why do you
think openness is useful when compared to other measures? (5 marks)
Openness constitutes the platforms of economic globalization as it describes the levels or extent of
imports and exports that nations are involved in, which concerns one of the main factors to
globalization, interconnectedness.

Trade openness (T.O) is not the most accurate measurement in telling the amount & efficiency of a
nation’s overall economic advancement/interaction with globalization because T.O mostly concerns
imports and exports.

Meaning a large amount of T.O data doesn’t necessarily correlate with domestic economic
growth/stability. It also does not incorporate about other factors to economic globalization (like
FDI’s, skilled labour etc). It would, however, be an effective way of measuring improvements in
‘quality of life’ or ‘nourishment’. (Rises in T.O% could meaning an increase in influx of imports,
meaning more food, meaning better Q.O.L.)

The data collected from the 2 nations tells us that most nations associated with high recorded levels
of T.O (%GDP) seem to have a lower overall economy & amount of GDP per capita (%) than
nations with lower T.O levels. This correlation can be seen in comparisons like the U.S. & Nigeria,
Australia & Cambodia and U.K. & Algeria. (World Bank Indicator, 2019)

Other indicators like GNI (Gross National Income) and M2 (Money Supply) could be a more
effective measurement in testing economic health rather than trade openness, as they are directly
related to money in hand/average income, in comparison to T.O% which is mostly about
imports/exports.

3. Using 2 graphs (one for each country), plot openness versus time for each country.
Explain approximately 100 words how openness has changed for these countries from
1985 to 2005. Make sure your graph is properly labelled. (5 marks)

The trade openness level (T.O%) of Turkey advanced at the highest rate from 30.5% in 1991 to
55% in 1997, T.O levels in Turkey were inconsistently spread . The war against the Kurdish
separatist PKK in south-eastern Turkey, which lasted from 1984 until 1999, also imposed a large
fiscal burden to Turkey. (Pamuk, 2007)

%GDP
 Turkeys lowest rate of trade
openness was in 1986 (29.4%)

Turkeys highest rate of trade

openness was in 1997 (55%)

Source: World Bank – Data Indicator

Vietnam had a recorded average T.O% of 79.8%. From 1988 to 1990, the nation had its highest
upward trend, growing from 19% to 81.3%, a huge 62.3% increase.

Generally, Vietnams T.O% displays a consistent upward trajectory throughout the years. Their 1986
‘Doi Moi’ economic reforms would be a main factor to this generally consistent & high level of T.O
growth. ‘Doi Moi’ strongly aided Vietnam’s openness rate rise 107% in 25 years.

%GDP

Vietnams highest point

of trade openness was
in 2004 (133%)

Vietnams lowest point

of trade openness was
in 1988 (19%)

Source: World Bank – Data Indicator

4. Explain in approximately 100 words the relationship between openness and economic
development by calculating the correlation coefficient between GDP per capita (proxy for
economic development) and openness for each of the two countries, respectively. [Here
you have to use the CORREL command in Excel]. DO NOT ATTACH YOUR DATA TO
THE ASSIGNMENT. (5 marks)

The correlation coefficient (C.C) is applied to figure out a relationship between T.O & GDP Per
Capita. The C.C. is measured from +1 to -1, 0 meaning there is no correlation between 2 variables.
For example, if the C.C value is +.8, we can understand that the relationship between openness and
GDP per capita is very strong. The closer the figure is to +1, the more substantial the relationship
between the 2 variables is.

Turkeys correlation coefficient is .707, which represents a relatively high positive correlation. The
ratio indicates the economic output of a nation for its population. The ratio is equal to GDP divided
by total number of people, which also evaluates the living standard of the country.

Vietnams correlation coefficient is .905, which represents a strong relationship between openness
and GDP Per Capita.

5. Explain in approximately 250 words the factors that you think drive openness in these two
countries. What domestic policy changes have driven openness and how have changes the in
international economic and political arena affected their main exports?

(For example, have shocks increased or decreased the price of their main export in international
markets?) [You are expected to undertake research to answer this question]. If you use information,
reference it. References do not count in the word count. (5 marks)

Major factors to economic growth in trade openness for Vietnam & Turkey is derived from trade,
increased employment, changes in economic reform’s & FTA’s.

An FTA was imposed on Turkey in 1996, with the signing of the EU Customs Union pact. The
signing of the agreement allowed for products such as processed agricultural products &
infrastructure to be traded free of import/export tax’s, thus aiding their ease of doing trade further.
(Ministry of Trade, 2018) Turkey was also the number one Asia-Pacific nation for amount of
PTA’S/PTA’S with labour provisions in 2016. (Posso, 2017)
For example, a relation between the FTA & its benefits can be the fact that Turkey earned $1.78B
from their processed hazelnut sales alone in 2018, selling a huge 287,000 tons, efficiency in
agriculture as such, drives economic openness & progression a lot. (Anadolu Agency, 2019) This is
an example of how the FTA of 1996 still played a role in their 2018 sale figures due to the cuts in
‘would-be’ trade costs.

Vietnams ‘Doi Moi’ economic reform policy of 1986 was aimed at launching a ‘free market’
orientated economy, thus allowing more FDI’s, ease in trading, boosts in agricultural output, influx
of private businesses, freeing markets up and looser regulations for inflowing investments than ever
before. (Cima, 1989) This was a major driving factor to the rise in T.O (post 1986) for Vietnam, the
policy allowed for more influx of trade openness. The positive growth that followed is very evident
in both graphs for Vietnam.

Bouncing back from the dark 20-year Vietnam war (ended in 75’), this policy drove openness in
Vietnam to unimagined heights, for example, from 1986 to 1990, T.O% rose from 23.2% to 81.3%,
a 58.1% increase.

%GDP

Source: World Bank – Data Indicator

%GDP
 This line represents the perfectly consistent
upward trend. Post 1986 (Doi Moi, the GDP
Per Capita rose higher every single year,
proving advancement due to the policy.

Source: World Bank – Data Indicator

REFERENCES:

Anadolu Agency. (2019). Turkey Exports 267,000 Tons of Hazlenuts.Available:

http://www.hurriyetdailynews.com/turkey-exports-262-000-tons-hazelnut-in-11-months-
145488. Last accessed 3rd August 2019.

Cima, Ronald (1989). Vietnam, A Country Study. Washington DC: Library of Congress.
293.

Country Brief 2010, World Bank. (2010). World Bank in Turkey. Available:
http://www.worldbank.org.tr/WBSITE/EXTERNAL/COUNTRIES/ECAEXT/TURKEYEXTN/0,,co
ntentMDK:20630704~menuPK:361720~pagePK:141137~piPK:141127~theSitePK:361712
,00.html. Last accessed 28th July 2019.

Europe Data Entrys. (2019). Enhancement of EU-Turkey bilateral trade relations and
modernisation of the EU-Turkey Customs Union. Available:
http://ec.europa.eu/trade/policy/countries-and-regions/countries/turkey/. Last accessed
3rd August 2019.

International Monetary Fund. (2019). World Economic Outlook Database. Available:

https://www.imf.org/external/pubs/ft/weo/2019/01/weodata/weorept.aspx?pr.x=27&pr.y
Last accessed 1st August 2019.

Ministry of Trade - Turkey. (2018). Free Trade Agreements. Available:

https://www.trade.gov.tr/free-trade-agreements. Last accessed 28th July 2019.

Organisation for Economic Co-operation and Development. (2019). Turkey Country

Profile. Available: https://oec.world/en/profile/country/tur/. Last accessed 24th July 2019.

Organisation for Economic Co-operation and Development. (2019). Vietnam Country

Profile. Available: https://oec.world/en/profile/country/vnm/. Last accessed 25th July
2019.

Posso, A (2017) ‘Preferential Trade Agreements with labour provisions and child labour:
Evidence from Asia Pacific’, Asia-Pacific Development Journal 24(2), pp. 89-111.
Sevket, Pamuk. (2007). Economic change in twentieth century Turkey: Is the glass more
than half full? Available:
https://www.researchgate.net/publication/228381130_Economic_change_in_twentieth_ce
ntury_Turkey_Is_the_glass_more_than_half_full. Last accessed 28th July 2019. (Page 20)

World Bank Indicator. (2019). Country Profile - Turkey. Available:

https://databank.worldbank.org/source/world-development-indicators. Last accessed 3rd
August 2019.

World Bank Indicator. (2019). Country Profile - Vietnam. Available:

https://databank.worldbank.org/source/world-development-indicators. Last accessed 3rd
August 2019.