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Module 10: Balance of Payments and Foreign Exchange

Description

Module 10: Discussion

Balance of Payments

Discuss KSA’s categories of balance-of-payments.
Discuss why the supply and demand for foreign exchange are considered to be derived schedules.
Discuss the meaning of a surplus (deficit) on the merchandise trade balance, goods and services balance, and current account balance? Discuss how this impacts trade in Saudi Arabia.

Directions:

Discuss the concepts, principles, and theories from your textbook. Cite your textbooks and cite any other sources if appropriate.
Your initial post should address all components of the question with a 500 word limit.

This module investigates the flow of monetary capital among countries. Balance of payments is the measurement of the aggregate flow of monetary capital in and out of a country. Emphasis turns to monetary transactions among countries with different currencies, examining foreign exchange markets and rates of exchange among currencies.

Learning Outcomes

Evaluate the implications of balance of payments, surpluses, and deficits on national economies.
Critically evaluate the implications of surplus, balance, and deficit in a current account and capital and financial accounts.

Readings

Required:

Chapter 10 in International Economics

Chapter 11 in International Economics

Ibarra, R. & Tellez-Leon, I. (2020). Are all types of capital flows driven by the same factors? Evidence from Mexico. Empirical Economics, 59(1), 461-502. Retrieved from

Recommended:

Chapters 10 and 11 PowerPoint slides

Harvey, J. (2019). Exchange rates and the balance of payments: reconciling an inconsistency in Post Keynesian Theory. Journal of Post Keynesian Economics, 42(3), 390-415.

Chapter 10
The Balance of Payments

Robert J. Carbaugh, International Economics, Eighteenth Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.

Chapter Outline
10-1 Double-Entry Accounting

10-2 Balance-of-Payments Structure
10-3 U.S. Balance of Payments
10-4 What Does a Current Account Deficit (Surplus) Mean?
10-5 Balance of International Indebtedness
10-6 The Dollar as the World’s Reserve Currency

10-1
Double-Entry Accounting

What Is the Balance of Payments?
• A record of the economic transactions between the residents of 1 country and
the rest of the world
• An international transaction is an exchange of goods, services, or assets
between residents of one country and those of another
• Residents include businesses, individuals, and government agencies that
make the country their legal domicile

Double-Entry Accounting
• Arranging international transactions into a balance-of-payments account
requires that each transaction be entered as credit or debit
• Known as double-entry accounting
• A credit transaction results in a receipt of a payment from foreigners;
recorded with a plus sign (+)

• A debit transaction is one that leads to a payment to foreigners; recorded
with a minus sign (−)

Credit Transactions
• From the U.S. perspective, the following transactions are credits (+), leading to
the receipt of dollars from foreigners:
• Merchandise exports
• Transportation and travel receipts
• Income received from investments abroad
• Gifts received from foreign residents
• Aid received from foreign governments
• Investments in U.S. by overseas residents
Robert J. Carbaugh, International Economics, Eighteenth Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.

Debit Transactions
• From the U.S. perspective, the following transactions are debits (−), because
they involve payments to foreigners:
• Merchandise imports
• Transportation and travel expenditures
• Income paid on the investments of foreigners
• Gifts to foreign residents
• Aid given by the U.S. government
• Overseas investment by U.S. residents
Robert J. Carbaugh, International Economics, Eighteenth Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.

Discussion Activity (1 of 2)
International Payments Process

• Use the flowchart to show how, when, and where the South Korean
producer will obtain his won so that he can spend the money in South
Korea?

10-2
Balance-of-Payments Structure

Current Account
• The monetary value of international flows associated with transactions in
goods, services, income flows, and unilateral transfers
• Consists of:
• Merchandise trade balance (trade balance)

• Goods-and-services balance
• Income receipts and payments balance
• Unilateral transfers balance

Capital and Financial Account
• Capital and financial transactions in the balance of payments include all
international purchases or sales of assets
• Includes both private sector and central bank transactions
• Assets broadly defined to include titles to real estate, corporate stocks &
bonds, government securities, and ordinary commercial bank deposits
• Nonfinancial assets include sale and purchase of rights to natural resources,
patents, copyrights, and trademarks
• Capital transfers include debt forgiveness and migrants’ goods and financial
assets accompanying them as they leave or enter country
Robert J. Carbaugh, International Economics, Eighteenth Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.

Private-Sector Financial Transactions
• Vast majority of transactions in capital and financial account come from private
financial transactions
• Capital and financial transactions are recorded in balance-of-payments
statement by
• Applying a plus sign (credit) to capital and financial inflows
• Applying a minus sign (debit) to capital and financial outflows

• Financial outflows imply opposite movements

Official Settlements Transactions
• Movement of financial assets among official holders

• Financial assets categories:
• Official reserve assets (U.S. Government assets abroad)
• Liabilities to foreign official agencies (foreign official assets in the United
States)

Official Reserve Assets
• Official holdings of reserves used for 2 purposes:
1. Provide a country sufficient international liquidity to finance short-run trade
deficits, currency crises, etc.
2. Central banks sometimes buy or sell official reserve assets in the private
sector to stabilize their currencies’ exchange rate.

• Includes:
• Stock of gold reserves
• Convertible currencies

• Reserve position of U.S. in IMF
Robert J. Carbaugh, International Economics, Eighteenth Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.

Special Drawing Rights
• Created by the IMF as a supplement to the existing reserves of member
countries
• Asset can be transferred among participating nations in settlement of balanceof-payments deficits or stabilization of exchange rates
• Value of SDR is defined as a basket of currencies
• Includes U.S. dollar, Japanese yen, U.K. pound, euro

Statistical Discrepancy: Errors and
Omissions
• Data collection process for balance-of-payments figures is imperfect

• Government statisticians base figures partly on information collected & partly
on estimates
• When statisticians sum credits & debits, rarely match

• Since debits must equal credits, residual is inserted to make them equal
• This correcting entry is statistical discrepancy, or errors and omissions

10-3
U.S. Balance of Payments

Table 10.2 U.S. Balance of Payments, 2018
(billions of dollars)
Current Account

Capital and Financial Account

Merchandise trade balance

−887.4 U.S. net borrowing measured by capitalfinancial account transactions

445.5

Exports

1,674.3 Statistical discrepancy

45.5

Imports

−2,561.7 Balance on capital and financial account

491.0

Services balance

259.7

Goods and services balance

−627.7

Income receipts and payments
balance

254.0

Unilateral transfers balance

−117.3

Current account balance

−491.0

Table 10.3 U.S. Balance of Payments, 1980–
2018 (Billions of Dollars)
Year

Merchandise
Trade-Balance

Services
Balance

Goods and
Services-Balance

Income Receipts and
Payments-Balance

Unilateral
Transfers-Balance

Current
Account-Balance

1980

−25.5

6.1

−19.4

30.1

−8.3

2.4

1984

−112.5

3.3

−109.2

30.0

−20.6

−99.8

1988

−127.0

12.2

−114.8

11.6

−25.0

−128.2

1992

−96.1

55.7

−40.4

4.5

−32.0

−67.9

1996

−191.3

87.0

−104.3

17.2

−42.1

−129.2

2000

−452.2

76.5

−375.7

−14.9

−54.1

−444.7

2004

−665.4

47.8

−617.6

30.4

−80.9

−668.1

2008

−820.8

139.7

−681.1

127.6

−119.7

−673.2

2012

−735.3

195.8

−539.5

198.6

−134.1

−475.0

2016

−749.9

249.3

−500.6

180.6

−161.2

−481.2

2018

-887.4

259.7

627.7

254.0

-117.3

-491.0

International Transactions Balance
• Taken as a whole, U.S. international transactions always balance

• Any force causing increase or decrease in 1 balance-of-payments account
leads to exactly offsetting changes in balances of other accounts
• In 2018, U.S. had current account deficit of -$491.0

• Offsetting this deficit was a combined surplus of $491.0 billion in remaining
capital & financial accounts (including statistical discrepancy)

10-4
What Does a Current Account Deficit (Surplus)
Mean?

Net Foreign Investment and the Current
Account Balance
• Current account balance is synonymous with net foreign investment in national
income accounting
• Current account surplus means an excess of exports over imports; nation
becomes lender to rest of world
• Current account deficit means an excess of imports over exports; nation
becomes borrower from rest of world

Impact of Capital Flows on the Current
Account (1 of 2)
• Capital and financial flows can initiate changes in the current account

• In 1980s, massive financial inflow caused current account deficit for U.S. —
resulted from increase in U.S. interest rates relative to interest rates abroad
• Higher interest rates caused by growing budget deficit and decline in private
savings
• Current account deficit may be driven by capital flows: capital inflows keep
dollar stronger than it otherwise would be, boosting imports and suppressing
exports

Impact of Capital Flows on the Current
Account (2 of 2)
• When foreigners start purchasing more of our assets than we are purchasing
of theirs, the dollar becomes more costly in the foreign exchange market
• U.S. goods more expensive to foreigners, declining exports
• Foreign goods become cheaper to Americans, increasing imports

Relatively
high interest
rates in U.S.

Capital
Appreciation of
U.S. exports
Current
→ inflows for → dollar’s
→ decrease/imports → account deficit
U.S.
exchange value
increase
for U.S.

Does a Bilateral Trade Deficit Imply Unfair
Trade?
• President Trump revised NAFTA to reduce America’s trade deficits with
Canada and Mexico
• Bilateral trade deficit matters little for country’s aggregate (global) trade
balance
• America’s imports would move from Mexico to other countries as production of
relevant products shifts, or America’s exports would move to Mexico from other
countries, with negligible net impact on overall balance

Business Cycles, Economic Growth, and the
Current Account
• Rapid growth of production & employment associated with growing trade &
current account deficits
• Slow output & employment growth associated with growing surpluses
• During recession, saving & investment tend to fall; current account balance
tends to rise; trade balance improves
• Opposite occurs during periods of boom

How the United States Has Borrowed at Very
Low Cost (1 of 2)
• Since early 1980s, U.S. current account moved from small surplus to large
deficit, financed by borrowing from or selling assets to foreigners
• U.S. has become large net debtor; must make larger payments of interest &
principal to foreign lenders
• In past 2 decades, paradox: U.S. residents earned more from foreign
investments than foreigners earned from U.S. investments
• U.S. has been large debtor without bearing negative debt-service cost;
suggests current account deficits might be less burdensome than portrayed

How the United States Has Borrowed at Very
Low Cost (2 of 2)
• What accounts for paradox?
• Asymmetric investment returns; rate-of-return advantage generally 1–2%
points; given political and economic instability of other countries, U.S. firms
take greater risks investing in foreign firms; higher risk/reward
• U.S., by contrast, seen as safe haven; foreign investors more likely to buy
U.S. assets that offer low risk, return
• Future U.S. borrowing may be less favorable
• If interest rates rise, U.S. will pay higher rates

• Could swing U.S. investment income balance from surplus to deficit
Robert J. Carbaugh, International Economics, Eighteenth Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.

Do Current Account Deficits Cost Americans
Jobs?
• U.S. employment statistics don’t fit expected pattern of negative relationship
between current account deficit and employment
• Trade deficit may hurt employment at some firms & industries as workers are
displaced by imports, but economy-wide, deficit matched by equal inflow of
foreign funds sustaining investment spending

• Current account deficit produces jobs as result of higher employment in
investment-oriented industries and indirect effect of higher investment

Can the United States Continue to Run
Current Account Deficits Indefinitely? (1 of 3)
• Foreigners have remained willing to buy U.S. assets such as Treasury
securities
• Large increase in U.S. current account deficit not possible without inflows of
foreign capital from nations with high savings, such as Japan & China
• China a major supplier of capital to U.S.
• China has followed exchange-rate policy of keeping value of yuan low to
export goods to U.S. & create jobs for its workers

Can the United States Continue to Run
Current Account Deficits Indefinitely? (2 of 3)
• China’s central bank has converted its dollar holdings into U.S. securities that
pay interest
• Enables U.S. to benefit from willingness of China to finance current account
deficit
• U.S. can “print money” that Chinese hold in order to finance its excess
spending
• Some analysts concerned that foreign investors may view increasing U.S.
foreign debt as unsustainable or riskier and shift capital elsewhere; U.S. also
seen as politically reliant on China, giving latter leverage

Can the United States Continue to Run
Current Account Deficits Indefinitely? (3 of 3)
• No automatic or economic reason why U.S. can’t sustain current account
deficit indefinitely, if foreigners wish to purchase U.S. assets
• Consequences of current account deficit are growing foreign ownership of
capital stock and rising fraction of U.S. income paid as interest & dividends to
foreigners

• Serious problem could emerge if foreigners lose confidence in ability of U.S.
to repay

Discussion Activity (2 of 2)
The iPhone’s Complex Supply Chain Depicts Limitations of Trade Statistics

• Given the limitations of balance-of-payments statistics, do you think they
are of much use to policy makers?

10-5
Balance of International Indebtedness

International Investment Position of the
United States
• Balance of international indebtedness Is a record that summarizes fixed stock
of assets and liabilities against rest of world at particular time
• Shows accumulated value of U.S.-owned assets abroad
• U.S. is net creditor to rest of world when accumulated value of U.S. owned assets abroad
> value of foreign-owned assets in U.S.

• U.S. is net debtor when reverse holds

• Shows holdings in several categories, so that policy implications can be
drawn from each separate category about the liquidity status of nation

Table 10.5 International Investment Position of the
United States at Year End (Billions of Dollars)
Type of Investment (Current Cost)
U.S.-owned assets abroad (U.S.
assets)

1995

2000

2018

3,406

6,168

25,241

Foreign-owned assets in the United
States (U.S. liabilities)

3,906

8,010

34,795

Net international investment position

−500

−1,842

-9,555

Relative share: U.S. net international
investment position/U.S. gross
domestic product

15%

44%

United States as a Debtor Nation
• In early industrial development, U.S. was net international debtor, relying on
foreign funds to build its industries
• After World War I, U.S. became net international creditor
• By 1987, U.S. had become net international debtor and has continued in that
position, with foreign investors placing more funds in U.S. than U.S. residents
have invested abroad

10-6
The Dollar as the World’s Reserve Currency

Reserve Currency
• Dollar is main reserve currency in world today
• Almost two-thirds of world’s official foreign exchange reserves held in dollars
• Four-fifths of daily foreign exchange trades involve dollars
• Euro is second-most-important reserve currency but lags far behind dollar

• Widening trade deficits & expanding foreign debt of U.S. have weakened
prestige of dollar
• Widespread use of dollar makes it difficult to displace as world’s main reserve
currency
Robert J. Carbaugh, International Economics, Eighteenth Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.

Benefits to the United States (1 of 2)
• Americans can purchase products at marginally cheaper rates than nations
that must exchange their currency and pay a transaction cost
• Americans can borrow at lower interest rates, and U.S. government can
finance larger deficits longer and at lower interest rates
• U.S. can issue debt in its own currency, pushing exchange-rate risk onto
foreign lenders
• Fall in dollar’s value could wipe out their returns

Benefits to the United States (2 of 2)
• Rising concern about continuing role of dollar as world’s main reserve currency
• China fears U.S. digging hole with economy based on huge deficits &
massive borrowing
• Worries about volatility of dollar & destabilizing effect it can have on
international trade & finance

• Critics claim credit-based reserve currency (dollar) inherently risky; promotes
spread of financial crises

Will the Special Drawing Right or the Yuan
Become a Reserve Currency? (1 of 3)
• In 2009, China proposed overhaul of international monetary system in which
special drawing rights (SDRs) would replace dollar as world’s main reserve
currency
• Objective to adopt reserve currency disconnected from single country and
stable in long run

• China proposed currency basket be expanded to include all major
currencies, including Chinese yuan and Russian ruble

Will the Special Drawing Right or the Yuan
Become a Reserve Currency? (2 of 3)
• Benefit
• Currency risk would be diversified
• Pitfall:
• SDR backed only by good faith and credit of IMF

• Dollar backed by goods and services produced by Americans and people’s
willingness to exchange those goods and services for dollars

Will the Special Drawing Right or the Yuan
Become a Reserve Currency? (3 of 3)
• Loss of reserve currency position costly for U.S.
• Americans would pay more for imports as dollar depreciates, because
foreigners would no longer buy dollars as they did when dollar was reserve
currency
• Interest rates on private and governmental debt would increase, because
foreigners, holding fewer dollars, will purchase fewer dollar-denominated
assets

Case Study Activity
Will Cryptocurrencies Really Lower the Dollar’s Status as a World Reserve
Currency?
• Why or why not?

Self-Assessment
• What is the balance of payments?

• How are economic transactions identified on the balance of payments?
• What is the balance of international indebtedness?

Summary
Now that the lesson has ended, you should have learned how to:

• Define the balance of payments.
• Identify the credit and debit transactions on the balance of payments.
• Discuss the current account and the capital account of the balance of
payments.
• Identify trends on the U.S. balance of payments.
• Describe the balance of international indebtedness.

Chapter 11
Foreign Exchange

Chapter Outline (1 of 2)
11-1 Foreign-Exchange Market

11-2 Foreign Currency Trading Becomes Automated
11-3 Types of Foreign-Exchange Transactions
11-4 Interbank Trading
11-5 Reading Foreign-Exchange Quotations
11-6 Forward and Futures Markets

Chapter Outline (2 of 2)
11-7 Foreign Currency Options

11-8 Exchange-Rate Determination
11-9 Indexes of the Foreign-Exchange Value of the Dollar: Nominal and Real
Exchange Rates

11-10 Interest Arbitrage, Currency Risk, and Hedging
11-11 Foreign-Exchange Market Speculation

11-12 Foreign-Exchange Trading as a Career
Robert J. Carbaugh, International Economics, Eighteenth Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.

11-1
Foreign-Exchange Market

Foreign-Exchange Market (1 of 2)
• Organizational setting in which individuals, businesses, governments, and
banks buy and sell foreign currencies and other debt instruments
• Largest and most liquid market in world
• Dominated by 4 currencies:

• U.S. dollar, Euro, Japanese yen, British pound
• Three of largest markets located in London, New York, and Tokyo

Foreign-Exchange Market (2 of 2)
• Foreign exchange market functions at 3 levels:

• Transactions between commercial banks and commercial customers
• Domestic interbank market conducted through brokers
• Active trading in foreign exchange with banks overseas

11-2
Foreign Currency Trading Becomes Automated

Automated Forex Trading Systems
• Most foreign-exchange trading is now done electronically

• Trader programs set rules to instruct computer software on what signals to look
for and how to interpret them
• Software analyzes currency price charts and other market activity

• If software identifies a currency pair trade that satisfies predetermined
parameters for profitability, it broadcasts a buy or sell alert and automatically
makes the trade

11-3
Types of Foreign-Exchange Transactions

Spot Transaction
• Spot market

• Foreign exchange bought and sold for immediate delivery
• Spot transaction
• Outright purchase or sale of currency now, as in “on the spot”
• Spot dealing simplest way to meet currency requirements but carries high
risk of exchange rate fluctuations because there’s no certainty of rate until
transaction complete

Forward Transaction
• Forward market
• Foreign exchange bought/sold for delivery at future date⎯exists mainly for
widely traded currencies
• Forward transaction
• Receiving or paying an amount of foreign currency on a specific date in
future, months to years from now
• Fixed exchange rate
• Protect against unfavorable movements in exchange rate but will not allow
gains to be made, should exchange rate move in one’s favor
Robert J. Carbaugh, International Economics, Eighteenth Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.

Currency Swap
• Conversion of one currency to another currency at one point in time

• Agreement to reconvert it back to original currency at specified time in future
• Rates of both exchanges agreed to in advance
• Involves single transaction in which traders agree to pay/receive stipulated
amounts of currencies at specified rates

11-4
Interbank Trading

Bank Transactions
Retail transactions

• Bank purchases from and sales to customers
• Less than 1 million currency units

Wholesale transactions

• More than 1 million currency units

• Between banks or with large corporate
customers

Spread
Bid rate

• Price that bank is willing to pay for unit of foreign
currency

Offer rate

• Price at which bank is willing to sell unit of
foreign currency

Spread

• Difference between bid and offer rate

11-5
Reading Foreign-Exchange Quotations

Foreign Exchange Quotations (1 of 2)
• Price of 1 currency in terms of another

• Exchange-rate quotations express currency values relative to the U.S. dollar
• Example:
• Exchange rate: ER = $/£
• If ER = $2/£1 = $2, then purchasing £1 will require $2
• Or, $1 = £0.50, then purchasing $1 will require £0.50

Foreign Exchange Quotations (2 of 2)
• Currency depreciation
• More units of a nation’s currency required to purchase a unit of foreign
currency
• Currency appreciation
• Fewer units of a nation’s currency required to purchase a unit of foreign
currency
• Cross-exchange rate
• Exchange rate between any two currencies (such as Swiss franc and British
pound)
Robert J. Carbaugh, International Economics, Eighteenth Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.

11-6
Forward and Futures Markets

Forward Market
• Foreign exchange can be bought and sold for future delivery (forward market)

• Forward contracts are executed between banks or between a bank and a
customer
• Terms of forward contract include:

• Expiration date
• Quantity and price of the currency
• How contract will be settled
Robert J. Carbaugh, International Economics, Eighteenth Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.

Futures Market
• Involves trading currencies on an exchange

• Parties agree to future exchanges of currencies and set applicable exchange
rates in advance
• Limited number of leading currencies traded

• Trading takes place in standardized contract amounts and in specific
geographic location

Table 11.4 Forward Contract versus Futures
Contract
Issuer

Forward Contract
Commercial bank

“Over the counter” by telephone
Tailored to the needs of the
exporter/importer/investor; no set size
Date of delivery Negotiable
Contract costs Based on the bid/offer spread
Settlement
On expiration date only, at
prearranged price
Trading
Contract size

Futures Contract
International Monetary Market (IMM) of
the Chicago Mercantile Exchange and
other foreign exchanges such as the
Tokyo International Financial Futures
Exchange
On the IMM’s market floor
Standardized in round lots
Only on particular dates
Brokerage fees for sell- and buy-orders
Profits or losses paid daily at close of
trading

International Monetary Market (IMM) (1 of 2)
• Japanese yen contract on IMM

• Size of each contract is on the same line as the currency’s name
• First column: Maturity months
• Open: Price at which currency first sells when IMM opens in morning
• High: Contract’s highest price for day
• Low: Contract’s lowest price for day

• Settle: Contract’s closing price for day
Robert J. Carbaugh, International Economics, Eighteenth Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.

International Monetary Market (IMM) (2 of 2)
• Japanese yen contract on IMM

• Change: Compares today’s closing price with closing price as listed in
previous day’s paper
• (+) means prices ended higher

• (−) means prices ended lower

• Open interest: Total number of contracts outstanding

Table 11.5 Foreign Currency Futures,
November 13, 2019
Open

High

Low

Settle

Change

Open Interest

JAPAN YEN (CME)—12.5 million yen; $ per 100 yen
November 0.9187

0.9205

0.9165

0.9196

0.0015

1,769

December 0.9192

0.9220

0.9178

0.9210

0.0015

179,959

11-7
Foreign Currency Options

Options (1 of 3)
• Agreement between holder (buyer) and writer (seller)

• Holder has right, but not obligation, to buy or sell financial instruments at any
time through specified date
• Writer (seller) has obligation to fulfill a transaction

• Used by firms seeking to hedge against rate risk; also used by speculators
seeking profit

Options (2 of 3)
• Foreign currency options

• Options holder
• Has right to buy or sell fixed amount of foreign currency at prearranged price within
specified period

• Can choose which exchange rate to guarantee and length of contract

Options (3 of 3)
Call option

• Gives holder right to buy foreign currency at
specified price

Put option

• Gives holder right to sell foreign currency at
specified price
• Price at which option can be exercised

Premium

• Fee received by writer of options contract

11-8
Exchange-Rate Determination

Demand for Foreign Exchange
• Exchange rates in free market determined by supply and demand

• Demand for foreign exchange:
• Is derived demand
• Is driven by foreigners’ demand for domestic goods and assets
• Corresponds to debit items in a country’s balance of payments
• Varies inversely with price

Supply of Foreign Exchange
• Amount of foreign exchange offered in market

• Increases at various exchange rates, all other factors equal

Figure 11.1 Exchange-Rate Determination

Equilibrium Rate of Exchange
Increase in demand for pounds

• Rightward shift of demand curve
• Dollar depreciates against pound

Decrease in demand for pounds

• Leftward shift of demand curve
• Dollar appreciates against pound

Increase in supply of pounds

• Rightward shift of supply curve
• Dollar appreciates against pound

Decrease in supply of pounds

• Leftward shift of supply curve
• Dollar depreciates against pound

Table 11.6 Advantages and Disadvantages of
a Strengthening and Weakening Dollar
Strengthening (Appreciating) Dollar
Advantages

Disadvantages

1. U.S. consumers see lower prices on foreign goods.

1. U.S. exporting firms find it harder to compete in foreign
markets.

2. Lower prices on foreign goods help keep U.S. inflation
low.

2. U.S. firms in import-competing markets find it harder to
compete with lower-priced foreign goods.

3. U.S. consumers benefit when they travel to foreign
countries.

3. Foreign tourists find it more expensive to visit the United
States.

Weakening (Depreciating) Dollar
Advantages

Disadvantages

1. U.S. exporting firms find it easier to sell goods to foreign
markets.

1. U.S. consumers face higher prices on foreign goods.

2. Firms in the United States have less competitive
pressure to keep prices low.

2. Higher prices on foreign goods contribute to higher
inflation in the United States.

3. More foreign tourists can afford to visit the United
States.

3. U.S. consumers find traveling abroad more costly.

11-9
Indexes of the Foreign-Exchange Value of the
Dollar: Nominal and Real Exchange Rates

Exchange Rate Index
• Effective exchange rate or trade-weighted dollar

• Weighted average of exchange rates between domestic currency and those
of nation’s most important trading partners
• Weights determined by relative importance of nation’s trade with each of its
trading partners

Nominal Exchange-Rate Index
• Average value of dollar

• Not adjusted for changes in price levels in U.S. and trading partners
• An increase means the dollar appreciates relative to other currencies in index
• Loss of U.S. competitiveness
• A decrease means the dollar depreciates relative to other currencies in index
• Improves U.S. competitiveness

Exchange Rate Indexes of the U.S. Dollar
(March 1973 = 100)
Year

Nominal Exchange-Rate Index

Real Exchange-Rate Index

1973 (March)

100.0

1980

87.4

91.3

1984

138.3

117.7

1988

92.7

83.5

1992

86.6

81.8

1996

87.4

85.3

2000

98.3

103.1

2004

85.4

90.6

2008

80.7

88.5

2012

73.6

82.8

2016

95.8

109.0

2019 (November)

92.4

108.9

Real exchange-rate index
• Embodies changes in price levels in different countries; indicates average
value of dollar based on real exchange rates
• Real exchange rate
• Nominal exchange rate adjusted for relative price levels
• Increase in index indicates appreciation of dollar

The Forward Market (1 of 2)
• Currencies bought and sold now for future delivery, typically 1, 3, or 6 months

• Exchange rate agreed to at time of contract
• Payment made when future delivery takes place
• Banks provide this service to earn profits

The Forward Market (2 of 2)
• Forward rate

• Rate of exchange used in settlement of forward transactions
• At a premium
• When a foreign currency is worth more in forward market than in spot market
• At a discount
• When a foreign currency is worth less in forward market than in spot market

Forward Rate Formula

Relation between the Forward Rate and the
Spot Rate
• Relative gains from interest-rate differentials tend to be offset by losses on
foreign-exchange conversions, reducing or eliminating the incentive to invest in
U.K. Treasury bills

To profit from
relatively high
interest rates in
the U.K., U.S.
investors will

Buy pounds with
dollars in the
spot market
Sell pounds for
dollars in the
forward market

Spot price of the
pound rises,
say, to $2.01
per pound
Forward price of
pound falls, say,
to $1.99 per
pound

Pound moves to
a discount in the
forward market
and the relative
gains from
investing in U.K.
Treasury bills
decrease.

Managing Foreign-Exchange Risk
• Exchange-rate fluctuations

• Can substantially change returns on assets denominated in foreign currency
• Can swamp effects of interest-rate differentials
• Firms and individuals can hedge in the forward market
• Some firms that do not hedge rationalize that currency fluctuations even out
over the long term

Discussion Activity (1 of 2)
How Markel and Volkswagen Manage Foreign-Exchange Risk

• Do you think foreign currency hedging pays off?

Case Study Activity
Currency Risk and the Hazards of Investing Abroad

“Investors bear the risk of losing money if adverse fluctuations in exchange
rates or stock prices occur.”
• Given the possibility of fluctuating exchange rates, would you be willing
to invest in foreign securities?

11-10
Interest Arbitrage, Currency Risk, and Hedging

Interest Arbitrage
• Process of moving funds into foreign currencies to take advantage of higher
investment yields abroad
• Currency risk
• Unpredictable losses or gains returns from foreign investments converted
from foreign to domestic currency

Uncovered Interest Arbitrage
• Investor does not obtain exchange-market cover to protect investment
proceeds from foreign-currency fluctuations
Table 11.9 Uncovered Interest Arbitrage: An Example
Rate per Year
(%)

Rate per 3
Months (%)

U.K. 3-month Treasury bill interest rate

2.5

U.S. 3-month Treasury bill interest rate

1.5

Uncovered interest differential favoring the U.K.

1.0

Covered Interest Arbitrage
• Investor exchanges domestic currency for foreign currency at spot rate and
contracts in forward market to sell amount of foreign currency
Table 11.10 Covered Interest Arbitrage: An Example
Rate per Year
(%)

Rate per 3 Months
(%)

U.K. 3-month Treasury bill interest rate

U.S. 3-month Treasury bill interest rate

Uncovered interest-rate differential favoring the U.K.

Forward discount on the 3-month pound

−0.5

Covered interest-rate differential favoring the U.K.

0.5

11-11
Foreign-Exchange Market Speculation

Speculation
• Speculation

• Attempt to profit by trading on expectations about prices in future
• Long position
• Attempt to realize gains from an expected appreciation of a currency

• Short position
• “Sell high, buy low”

Leverage
• Using loans to borrow from brokers in excess of collateral deposit

Borrow 1 million
euros from a broker.
Use that sum to buy
$1.25 million at
today’s exchange
rate of $1.25 = 1
euro.

Assume that the
euro depreciates
tomorrow to $1.20 =
1 euro.
Sell $1.25 million for
1,037,500 euros.

Repay the 1 million
euro loan from the
broker and keep
37,500 euros as
profit.

How to Play the Falling Dollar
• Purchase foreign currency and convert currency back to dollars at a future time

• Purchase bonds denominated in a foreign currency and collect accrued
interest and appreciated value in dollars
• Purchase stocks of foreign corporations denominated in foreign currencies

• Hold a savings account denominated in a foreign currency
• Trade in currency derivatives

Discussion Activity (2 of 2)
Andy Krieger Shorts the New Zealand Dollar

• Do you think speculators like Krieger and Soros have a stabilizing or
destabilizing influence?

11-12
Foreign-Exchange Trading as a Career

Do You Truly Want to Trade Currencies?
• Foreign exchange traders:

• Are hired by commercial banks, companies, central banks
• Study factors that affect local economies and rates of exchange, then take
advantage of misvaluations of currencies by buying and selling in different
foreign exchange markets
• Only 15% of day traders realize profits

Self-Assessment
• Describe exchange-rate arbitrage.

• What is the difference between hedging and speculation?

Summary
Now that the lesson has ended, you should have learned how to:

• Discuss the operation of the foreign exchange market.
• Understand foreign exchange quotations.
• Explain how traders benefit from the forward exchange market.
• Describe how exchange rates are determined in a free market.
• Discuss the nature and operation of currency arbitrage.

• Explain the strategy of exchange-rate speculation.
Robert J. Carbaugh, International Economics, Eighteenth Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.

150

120

A RCTIC
OCEAN

0
A RCTIC
OCEAN

Greenland
(DENMARK)

NORWAY
ICELAND

U.S.

SWEDEN FIN

60
CANADA
BELGIUM

UNITED
KINGDOM DENMARK
NETH.
IRELAND
SLOVAKIA

HUNGARY
NORTH
PACIFIC
OCEAN

NORTH
ATLANTIC
OCEAN

UNITED STATES

EST
LITH.
POLAND

GERMANY CZECH RE
SWITZ. AUSTRIA
FRANCE
RO
ITALY

PORTUGAL SPAIN

GREEC
TUNISIA
MOROCCO

ALGERIA
MEXICO

CUBA

MAURITANIA

BELIZE
GUATEMALA
HONDURAS
EL SALVADOR
NICARAGUA
COSTA RICA
PANAMA

MALI
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CHAD
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LIBERIA
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VENEZUELA
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LIBYA

WESTERN
SAHARA

SURINAME
French Guiana
(FRANCE)

ECUADOR

‘

REP. OF THE CONGO

PERU

BRAZIL

SOUTH
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REPU
OF THE

ANGOLA

NAMIBIA
BOTS

PARAGUAY
CHILE

SOUT
AFRIC

30
URUGUAY
SOUTH
PACIFIC
OCEAN

ARGENTINA

ANTARCTICA
150

120

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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.

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120

150

A RCTIC
OCEAN

180

NORWAY
SWEDEN FINLAND

TED
DOM DENMARK
NETH.

RUSSIA
60

EST.
LAT.
LITH.
POLAND BELARUS

GERMANY CZECH REP. UKRAINE
SWITZ. AUSTRIA
ROMANIA

RANCE

ITALY

PAIN

TUNISIA

MALI

LIBYA

MONGOLIA

UZBEKISTAN

KYRGYZSTAN
TURKEY
TURKMENISTAN
TAJIKISTAN
ARMENIA
SYRIA
AFGHANISTAN
LEB.
IRAQ
IRAN
ISRAELJORDAN
KUWAIT
NEPAL
PAKISTAN

GREECE

ALGERIA

KAZAKHSTAN

AZERBAIJAN
BULGARIA GEORGIA

EGYPT

SAUDI
ARABIA

UNITED ARAB
EMIRATES
OMAN

NORTH KOREA
CHINA

ANGOLA

30
BANGLADESH

INDIA

BURMA LAOS

MOZAMBIQUE

ZIMBABWE
NAMIBIA
BOTSWANA

THAILAND

VIETNAM
CAMBODIA

SRI
LANKA
MALDIVES

PHILIPPINES

FEDERATED STATES
OF MICRONESIA

MARSHALL
ISLANDS

BRUNEI
MALAYSIA
SINGAPORE

INDONESIA
PAPUA
NEW GUINEA

SOLOMON
ISLANDS

INDIAN
OCEAN

MALAWI
ZAMBIA

NORTH
PACIFIC
OCEAN

JAPAN

BHUTAN

NIGER

CHAD
ERITREA YEMEN QATAR
URKINA
SUDAN
FASO
NIGERIA
DJIBOUTI
BENIN
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CENTRAL
ETHIOPIA
RE TOGO
AFRICAN REPUBLIC
SOMALIA
GHANA
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KENYA
GABON
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DEMOCRATIC
EP. OF THE CONGO
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OF THE CONGO TANZANIA

SOUTH
KOREA

FIJI

MADAGASCAR
AUSTRALIA

SWAZILAND
SOUTH
AFRICA

LESOTHO

NEW
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SOUTH
PACIFIC
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60

ANTARCTICA
0

120

150

180

58938_end03_hr_000-000.indd 1

8/3/18 9:57 AM

International Economics
SEVENTEENTH EDITION

R O B E R T J. CA R BAU G H
Professor of Economics, Central Washington University

Australia • Brazil • Mexico • Singapore • United Kingdom • United States

58938_fm_hr_i-xxiv.indd 1

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International Economics,
S
eventeenth edition
Robert J. Carbaugh
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Library of Congress Control Number: 2018939997
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Printed in the United States of America
Print Number: 01 Print Year: 2018

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Brief Contents

preface �� xii
about the author �� xxi
chapter 1

The International Economy and Globalization �� 1

PART 1

International Trade Relations 25

chapter 2 Foundations of Modern Trade Theory: Comparative

Advantage�� 27
chapter 3

Sources of Comparative Advantage �� 71

chapter 4

Tariffs �� 113

chapter 5

Nontariff Trade Barriers �� 157

chapter 6

Trade Regulations and Industrial Policies �� 189

chapter 7

Trade Policies for the Developing Nations �� 239

chapter 8

Regional Trading Arrangements �� 277

chapter 9 International Factor Movements and Multinational

Enterprises �� 311
PART 2

International Monetary Relations 343

chapter 10

The Balance-of-Payments �� 345

chapter 11

Foreign Exchange �� 375

chapter 12

Exchange Rate Determination �� 413

chapter 13 Exchange Rate Adjustments and the

Balance-of-Payments �� 439
chapter 14

Exchange Rate Systems and Currency Crises �� 459

chapter 15

Macroeconomic Policy in an Open Economy �� 495

glossary �� 511
index �� 529

iii
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.

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Contents

Preface ��xii
About the Author �� xxi
CHAPTER 1

The International Economy and Globalization ��1
Economic Interdependence: Federal Reserve Policy
Incites Global Backlash ��2
Globalization of Economic Activity ��3

Globalization Forces Kodak to Reinvent Itself �� 15
Bicycle Imports Force Schwinn to Downshift �� 16
Element Electronics Survives by Moving TV
Production to America�� 17

U.S. Apple Growers Not Overly
Worried about Chinese Imports��4

Common Fallacies of International Trade ��17

Waves of Globalization ��5
First Wave of Globalization: 1870–1914�� 5
Second Wave of Globalization: 1945–1980�� 6
Latest Wave of Globalization �� 7

Is International Trade an Opportunity or a
Threat to Workers?��19

Is the United States Losing Its
Innovation Edge?��18

Diesel Engines and Gas Turbines as
Movers of Globalization ��9

Has Globalization Gone Too Far? ��21

The United States as an Open Economy��9
Trade Patterns�� 9
Labor and Capital �� 12

Summary��24

Why Is Globalization Important?��13

The Plan of This Text ��23
Key Concepts and Terms ��24
Study Questions ��24

Globalization and Competition��15

PART 1 International Trade Relations

CHAPTER 2

Foundations of Modern Trade Theory: Comparative Advantage��27
Historical Development of Modern Trade Theory ��27
The Mercantilists �� 27
Why Nations Trade: Absolute Advantage �� 28

Adam Smith and David Ricardo��30
Why Nations Trade: Comparative Advantage �� 31
Production Possibilities Frontiers��33
Trading under Constant-Cost Conditions��35
Basis for Trade and Direction of Trade�� 35
Production Gains from Specialization �� 35

Babe Ruth and the Principle of
Comparative Advantage��37

Consumption Gains from Trade �� 38
Distributing the Gains from Trade �� 39
Equilibrium Terms of Trade �� 40
Terms of Trade Estimates�� 41

Dynamic Gains from Trade: Economic Growth��42
Changing Comparative Advantage��43

Natural Gas Boom Fuels Debate ��45
Trading under Increasing-Cost Conditions ��46
Increasing-Cost Trading Case �� 47
Partial Specialization �� 49
The Impact of Trade on Jobs ��49
Wooster, Ohio Bears the Brunt of Globalization ��50
Comparative Advantage Extended to Many
Products and Countries ��51
More Than Two Products �� 52
More Than Two Countries �� 52
Factor Mobility, Exit Barriers, and Trade ��53
Empirical Evidence on Comparative Advantage ��55

iv
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Contents

Can American Workers Compete with Low-Wage
Workers Abroad?�� 56

Outsourcing Backfires for Boeing 787 Dreamliner �� 63
Reshoring Production to the United States�� 64

The Case for Free Trade��58

Deindustrialization Redeploys
Workers to Growing Service Sector��64

Comparative Advantage and Global Supply Chains��58
Advantages and Disadvantages of Outsourcing �� 60
Outsourcing and the U.S. Automobile Industry�� 61
The iPhone Economy and Global Supply Chains �� 61

Summary��66
Key Concepts and Terms ��66
Study Questions ��67

CHAPTER 3

Sources of Comparative Advantage ��71
Factor Endowments as a Source of Comparative
Advantage��71
The Factor-Endowment Theory �� 72
Visualizing the Factor-Endowment Theory �� 74
Applying the Factor-Endowment Theory to U.S.–China
Trade �� 75
Chinese Manufacturers Beset by Rising Wages
and a Rising Yuan�� 76
Does Trade with China Take Away
Blue-Collar American Jobs?�� 77
Factor-Price Equalization �� 78

Globalization Drives Changes
for U.S. Automakers��79
Who Gains and Loses from Trade?
The Stolper–Samuelson Theorem �� 82
Is International Trade a Substitute for Migration?�� 83
Specific-Factors Theory: Trade and the Distribution
of Income �� 84
Does Trade Make the Poor Even Poorer? �� 86
Is International Trade Responsible for the Loss
of American Manufacturing Jobs? How about
Robots Instead?��88
Is the Factor-Endowment Theory a Good Predictor
of Trade Patterns? The Leontief Paradox ��89
Economies of Scale and Comparative Advantage ��90
Internal Economies of Scale �� 90
External Economies of Scale�� 91

Does a “Flat World” Make Ricardo
Wrong?��93
Overlapping Demands as a Basis for Trade ��93
Intra-industry Trade ��94
Technology as a Source of Comparative Advantage:
The Product Cycle Theory ��97
Radios, Pocket Calculators, and the International
Product Cycle�� 98
Japan Fades in the Electronics Industry�� 99
Dynamic Comparative Advantage: Industrial Policy�� 100
World Trade Organization Rules That Illegal
Government Subsidies Support Boeing and Airbus �� 102
Government Regulatory Policies and Comparative
Advantage�� 103

Do Labor Unions Stifle
Competitiveness? ��103
Transportation Costs and Comparative Advantage�� 105
Trade Effects�� 105
Falling Transportation Costs Foster Trade �� 107
How Containers Revolutionized the
World of Shipping�� 108
The Port of Prince Rupert: Shifting Competitiveness
in Shipping Routes�� 109
Summary�� 110
Key Concepts and Terms �� 111
Study Questions �� 111

CHAPTER 4

Tariffs��113
The Tariff Concept�� 114
Types of Tariffs �� 115
Specific Tariff�� 115
Ad Valorem Tariff�� 116
Compound Tariff �� 116

Trade Protectionism Intensifies
as Global Economy Falls into the
Great Recession��117

Effective Rate of Protection�� 118
Tariff Escalation �� 120
Outsourcing and Offshore Assembly Provision�� 121
Dodging Import Tariffs: Tariff Avoidance and Tariff
Evasion �� 122
Ford Strips Its Wagons to Avoid a High Tariff�� 122
Smuggled Steel Evades U.S. Tariffs �� 123
Postponing Import Tariffs�� 123

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Contents

Gains from Eliminating Import
Tariffs��124
Bonded Warehouse�� 124
Foreign-Trade Zone�� 125
FTZs Benefit Motor Vehicle Importers�� 126
Tariff Effects: An Overview�� 126
Tariff Welfare Effects: Consumer Surplus and
Producer Surplus……………………………………………………….. 127
Tariff Welfare Effects: Small-Nation Model…………………….. 129
Tariff Welfare Effects: Large-Nation Model…………………….. 131
Donald Trump’s Border Tax: How to Pay
for the Wall…………………………………………………………. 134
The Optimal Tariff and Retaliation……………………………. 135
Examples of U.S. Tariffs………………………………………………….. 135
Obama’s Tariffs on Chinese Tires………………………………. 135
Should Footwear Tariffs Be Given the Boot?……………….. 137

Could a Higher Tariff Put a Dent
in the Federal Debt?…………………………..138

How a Tariff Burdens Exporters……………………………………… 138
Tariffs and the Poor: Regressive Tariffs…………………………… 140
Arguments for Trade Restrictions…………………………………… 142
Job Protection…………………………………………………………… 143
Protection against Cheap Foreign Labor…………………….. 143
Fairness in Trade: A Level Playing Field…………………….. 145
Maintenance of the Domestic Standard of Living………… 146
Equalization of Production Costs……………………………….. 146
Infant-Industry Argument…………………………………………. 147
Noneconomic Arguments………………………………………….. 147
Would a Tariff Wall Really Protect U.S. Jobs?…………………. 148

Petition of the Candle Makers…………….149
The Political Economy of Protectionism…………………………. 150
A Supply and Demand View of Protectionism…………….. 151
Summary………………………………………………………………………… 152
Key Concepts and Terms………………………………………………… 153
Study Questions………………………………………………………………. 154

CHAPTER 5

Nontariff Trade Barriers��157
Absolute Import Quota ………………………………………………….. 157
Trade and Welfare Effects…………………………………………. 158
Allocating Quota Licenses…………………………………………. 160
Quotas versus Tariffs………………………………………………… 161

Whirlpool Agitates for Antidumping Tariffs on Clothes
Washers………………………………………………………………. 175
Vaughan-Bassett Furniture Company: Furniture
Dumping from China…………………………………………… 177

Tariff-Rate Quota: A Two-Tier Tariff……………………………… 162
Tariff-Rate Quota Bittersweet for Sugar Consumers……. 164

Is Antidumping Law Unfair?…………………………………………… 178
Should Average Variable Cost Be the Yardstick
for Defining Dumping?…………………………………………. 178
Should Antidumping Law Reflect Currency
Fluctuations?……………………………………………………….. 179
Are Antidumping Duties Overused?…………………………… 179

Export Quotas…………………………………………………………………. 164
Japanese Auto Restraints Put Brakes on
U.S. Motorists……………………………………………………… 165
Domestic Content Requirements……………………………………. 166

How American Is Your Car?……………….168

Other Nontariff Trade Barriers……………………………………….. 180
Government Procurement Policies: “Buy American”…… 180

Subsidies…………………………………………………………………………. 168
Domestic Production Subsidy…………………………………….. 169
Export Subsidy………………………………………………………….. 170

U.S. Fiscal Stimulus and Buy
American Legislation…………………………182

Dumping………………………………………………………………………… 171
Forms of Dumping……………………………………………………. 171
International Price Discrimination……………………………. 172

Social Regulations…………………………………………………….. 182
CAFE Standards……………………………………………………….. 182
Europe Has a Cow over Hormone-Treated U.S. Beef…… 183
Sea Transport and Freight Regulations………………………. 184

Avoiding Antidumping Duties:
U.S.–Mexico Sugar Agreement…………..174

Key Concepts and Terms………………………………………………… 185

Antidumping Regulations……………………………………………….. 174

Study Questions………………………………………………………………. 186

Summary………………………………………………………………………… 185

CHAPTER 6

Trade Regulations and Industrial Policies��189
U.S. Tariff Policies Before 1930……………………………………….. 189

Reciprocal Trade Agreements Act…………………………………… 192

Smoot–Hawley Act…………………………………………………………. 191

General Agreement on Tariffs and Trade………………………… 193

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Contents

Trade without Discrimination…………………………………… 193
Promoting Freer Trade……………………………………………… 194
Predictability: Through Binding and Transparency…….. 194
Multilateral Trade Negotiations………………………………… 195

Avoiding Trade Barriers during the
Great Recession…………………………………197
World Trade Organization……………………………………………… 198
Settling Trade Disputes……………………………………………… 198
Does the WTO Reduce National Sovereignty?…………….. 201
Does the WTO Harm the Environment?…………………….. 201
Harming the Environment………………………………………… 202
Improving the Environment………………………………………. 203
WTO Rules against China’s Hoarding of Rare
Earth Metals……………………………………………………….. 203
Future of the World Trade Organization……………………. 205
Trade Promotion Authority (Fast Track Authority)……….. 206
Safeguards (The Escape Clause): Emergency Protection
from Imports……………………………………………………………… 206
U.S. Safeguards Limit Surging Imports of …
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