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Global Interdependence: The Value of Trade | Ping Zhou | TEDxYDL


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[Applause]

thank you trade is good and in this ever

globalizing world it needs to be

embraced more than ever not vilified

this is something that is basically

agreed upon by nearly all economists and

how economists often quantify the

benefits of trade is to a model called

the productions possibilities frontier

it can get a little complicated so I’m

going to simplify this for you tonight

in this most bare basic form possible by

comparing avocados to Tigers and we’re

going to use people as opposed to

countries because there are far less

complex economic systems basically in

any given day we are limited by the

amount of skill resources and time to

the acquisition of goods we need in

order to survive and so therefore when

we choose to acquire one thing we have

to give up something else this is called

opportunity costs if we were to look at

this example person number one in any

given day on average could either

acquire 100 avocados or kill 50 Tigers

we need to ignore the logistical

realities of anyone being able to kill a

tiger with their bare hands let alone 50

or why they would want to but anyway 50

avocados or or I’m sorry hundred

avocados or 50 Tigers so therefore for

every one Tiger he choose to kill he has

to give up two avocados person number

two is significantly less productive

overall but much better at getting

avocados than killing Tigers I imagine

most of us would be more like person

number two in any given day they could

either have 80 avocados or just ten

Tigers so the equivalent here is for

every one Tiger if he chooses to kill he

will lose eight avocados this is where

trade comes in because if they choose to

work together they could both benefit

meet in the middle exchange one tiger

for four avocados therefore person

number one would double the amount of

avocados

he could get on his own and person

number two could double the amount of

tigers he could get for his eight

avocados fundamentally this is the root

of why trade is great

but that’s not it trade can even help

create jobs it’s true I know a lot of

you are sitting here thinking but wait I

thought that trade leads to job loss but

the reality is the overwhelming majority

of job loss in the past several decades

have been because of automation we’re

losing jobs to robots not foreigners and

let me explain how trade can actually

create jobs it’s through basically

incentivizing consumption it is

estimated that over 70% of America’s

gross domestic product is cause or is

directly related to consumption this is

what I mean let’s say I own a restaurant

that’s sold avocado and Tiger burgers

and I used to charge ten dollars for

this but thanks to trade I am able to

get my ingredients significantly cheaper

now right because I can double the

amount of kados I would have done have

been able to afford on my own so

theoretically I could lower the cost of

this I could pass these discounts off to

my customers let’s say now start

charging five dollars a burger but still

maintaining my profit margin because my

ingredients just got cheaper right so

because of this let’s say on average I

used to get 50 customers a day now I

have a hundred because my burgers are

cheap and delicious right so in order to

keep up with it the man I would have to

hire more staff I would need to have

another chef I would have to hire

another waitress or waiter I would have

to hire another person to manage the

register thus creating jobs because if I

don’t if I don’t keep up with this

demand then my restaurant will basically

be like Taco Bell drive-thru at 2:00 in

the morning which I’m sure for any of

you who’ve ever been you all had this

question why is the line so long all the

time

hire somebody please you know it’s true

trade in fact is so important to

economies that in the last century we

have not seen any country that did not

trade reach high levels of prosperity

let me give you some examples using

Canada as a benchmark here as you can

see Canada’s GDP per capita their

economy essentially experienced pretty

steady growth over the last half a

century because they’ve always been open

to trade now in contrast let’s take a

look at three other countries that

didn’t do this first we have Myanmar a

country located in Southeast Asia pretty

much since its independence it has been

governed by a military dictatorship that

isolated itself from the rest of the

world and it just has recently opened up

their country to trade to the outside

world coca-cola recently just came in it

was one of the last countries in the

world without coke until recently and as

you can see the exact moment in time

when this happened because their economy

skyrocketed once they opened up here’s

another greater example China under Mao

ska munis era there was literally no

growth at all and after his passing and

economic reforms were passed China shot

up like fireworks here where now it is

the world factory with the people having

the higher standard of living the

highest standard of living has ever had

in all of its history lastly let’s take

a look at Cuba Cuba after the Cuban

Revolution experienced modest growth

because it traded with the Soviet Union

but what you notice here is that in 1991

when the Soviet Union collapsed Cuba

also felt the pressure of it because

after the Soviet Union collapsed it was

no longer any investment in trading

between the two countries and as you can

clearly see here Cuba’s economy

absolutely fidel down

yeah I’d like that up and they were not

experienced oh I have more and they did

not it would not be able to get out of

this rut until they also opened

themselves up to trade and tourism to

the rest of the world see in fact you

might not know this but trade is so

important that you can even use it as a

geopolitical weapon where countries can

impose their will on other countries

simply by not trading with them and what

is known as trade sanctions so let’s

take a look at three examples on the

upper left here we have Iran as you can

see Iran was doing pretty well

economically and then the Iranian

Revolution happened and as a sign of our

disapproval the United States and much

of the United Nations imposed trade

sanctions on Iran and as you can see

their economy drop like nothing else

and it has never really recovered sense

if we look at Zimbabwe in the upper

right Zimbabwe was kind of teetering

along until of accusations that the

President Robert Mugabe committed voter

fraud and human rights abuses and so the

EU and the UN also imposed trade

sanctions on Zimbabwe and look what

happened to their economy the only

reason they rebounded just a little bit

sense is because they’ve established new

trade deals with China and lastly we

have Russia very recent data as you can

see from 2002 or msre 2012 to 2014 their

economy was doing pretty well primarily

from the export and trade of their

massive reserves of fossil fuel but what

happened was Russia basically decided to

illegally put in some soldiers on Crimea

and we didn’t like that either and so

the United States and the Ukraine yemm’s

are Unites States and the UN sanctioned

them and look at their economy in 2015

compared to 2014 absolutely devastated

so as I have shown you

trade is insanely important and it is

not a zero-sum game where only one

country wins and another country loses

often when taken in its whole trade

benefits everybody we need to encourage

good responsible trade deals with the

rest of the world not push for isolation

that would be a mistake

and besides without trade there would

not be enough guacamole to go around thank you very much

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