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[Abstract] This paper first explains the concept of trade pattern and its evolution, and then expounds the influence mechanism of demand change on trade structure from the perspective of market size and income level change, and draws a conclusion.
Keywords: demand change; Evolution of trade pattern; internal mechanism
International trade mode refers to international trade activities based on some form of division of labor. International trade mode is the core proposition of international trade theory, and the basic reason for its discussion is: what products should a country export and import in international trade in order to improve its welfare level. The evolution of trade mode means that with the accumulation of factors, changes in technology and system and changes in demand preference, a country will gradually change from a specialized production and trade mode to another mode. Generally speaking, the evolution of trade pattern means that with the development of a country's economy, the structure of its export products and services naturally alternates along the paths of resource-intensive products, labor-intensive products, capital-intensive products, technology-intensive products and knowledge-intensive products.
Changes in demand and trade patterns affect and interact with each other. On the one hand, the change of demand can play the role of economies of scale by affecting the market size, and can also make products more diversified, thus affecting a country's trade model. With the improvement of a country's per capita income level, the products it consumes and exports will evolve from low-quality products to high-quality products, and the trade pattern will change accordingly. At the same time, changes in demand will also have an impact on trade patterns through demonstration effects; On the other hand, international trade will in turn have an impact on income levels and consumer demand. More importantly, changes in demand not only affect the trade structure, but also affect a country's terms of trade.
First, the impact of demand changes on the trade structure.
(1) Market size and trade structure. The change of total consumption means the change of domestic market scale, which is closely related to the export trade model. The mechanism by which market size affects trade patterns is reflected in four aspects:
1, the huge market size provides the possibility for the full play of economies of scale. If the production of a commodity has the nature of increasing returns to scale or can pass R&; D innovation, then when the demand for this commodity in the domestic market is large, it may form a relative cost advantage in these products, which will lead to an increase in the export of this commodity. Economies of scale can be divided into two types: internal economies of scale and external economies of scale. Internal economies of scale stem from the expansion of enterprise production scale, while external economies of scale stem from the increase and relative concentration of enterprises in the industry, which leads to the reduction of costs in information collection, raw material transportation and product sales. In countries and regions with small domestic markets, economies of scale of most products must be achieved by opening up international markets. In countries with large markets, economies of scale of enterprises can generally be realized in the domestic market.
2. If the increase in the output of a certain product will drive the development of domestic infrastructure and auxiliary industries, and the transaction cost will drop, the country may establish a relative cost advantage on this product. Porter (1990) believes that related and supporting industries have an important impact on the international competitiveness of a country's specific industries. Related industries refer to industries linked by certain technologies and sharing the same marketing channels and services, or complementary industries. Supporting industry refers to the upstream industry of an industry. The promotion of related industries to an industry is as follows: on the one hand, it promotes the innovation of related industries (once related industries enter an industry, their new resources, new technologies and new competitive strategies will often promote the innovation and upgrading of related industries; On the other hand, the international success of related industries can also promote the international success of related industries (* * * enjoy marketing channels and services, so that related industries can quickly open the market from the initial stage of production. The role of supporting industries in downstream industries is as follows: providing low-cost input for domestic companies as soon as possible in the most effective way, reducing the production cost of downstream products; Constantly cooperate with downstream industries to promote downstream industry innovation.
With the growth of economy and the improvement of income level, the demand for differentiated products will increase. On the one hand, economies of scale of homogeneous products can reduce product costs and occupy more market share; On the other hand, differentiated products can make enterprises have a certain monopoly nature, thus setting higher prices and obtaining more profits. Economies of scale require the production of a large number of homogeneous products, which leads to the decline of market prices, while the pursuit of differentiated products requires the production of a small number of heterogeneous products. Therefore, producers are faced with the contradiction between achieving economies of scale when producing a certain level of products and meeting the consumption needs of consumers with different income levels. Krugman (1979) thinks that the contradiction between the pursuit of economies of scale and the pursuit of differentiated products can be solved through international trade. International trade can make mass-produced products distributed in different countries' markets, thus becoming small-batch differentiated products in each country. This shows that a country will not use all resources to meet the needs of consumers with different preferences, even if there is economies of scale, when the opportunity cost increases. At this time, developing countries can also realize horizontal division of labor and trade with developed countries by producing differentiated products, thus realizing the transformation of trade mode.
Manufacturers are often more sensitive to domestic business opportunities, and inventions and innovations are often inspired by unresolved reasons in the domestic market. At the same time, the continuous improvement of new products can only bring about the reduction of unit product cost with the expansion of production scale if they are accepted by domestic consumers. Therefore, the industry is often characterized by domestic operation at first, and then extends to the international market (passively) after the domestic market is saturated or due to accidental opportunities.
Changes in income level and trade structure. Engel's law points out that with the increase of people's income and the improvement of living standards, the proportion of food (necessities of life) in the increased income will continue to decline, while the proportion of luxury goods and durable goods will continue to rise. Under normal circumstances, with the increase of income, the consumption structure will evolve in the order of poverty consumption, food and clothing consumption, well-off consumption, affluent consumption and extremely affluent consumption. According to FAO standards, Engel's coefficient is above 60% absolute poverty, 50% ~ 60% barely living, 40% ~ 50% well-off, 30% ~ 40% rich, and below 30% extremely rich. Engel's law shows that with the change of income level, the consumption structure of residents will also change. The further expansion of Engel's law is that, because the income demand elasticity of industrial manufactured goods and high-tech products is much greater than that of primary products and labor-intensive products, with the increase of income, developing countries tend to import each other's products at a faster growth rate than developed countries. Due to the inflexibility of foreign demand, for developing countries, the expansion of exports has not brought about a rapid increase in income, but a deterioration in terms of trade.
With the improvement of a country's per capita income level, the products it consumes and exports will evolve from low-quality products to high-quality products. At the same price, consumers tend to prefer high-quality products, but high-quality products need more factor input and higher technical level in production, and high-quality products are accompanied by high cost and high price. Under the income constraint, high-income people generally choose high-quality products, while low-income people choose low-quality products. Therefore, the difference of income level will lead to different demand for vertical quality differentiated products in different countries. Therefore, it can be inferred that with the improvement of a country's per capita income level, the products it consumes and exports will evolve from low-quality products to high-quality products. Of course, if rich countries have a special preference for high-quality products, it will stimulate them to import more high-quality products. In addition, the change of income in turn is the change of consumption structure, which will not only lead to the change of trade pattern of products with differentiated quality, but also lead to the change of trade pattern at different levels, because the higher the income level, the more inclined to consume diversified products. (3) Demonstration effect and trade structure. Relative income hypothesis theory uses consumption? Demonstration effect? And then what? Ratchet effect? Explain the stability of long-term consumption tendency. From the perspective of international trade, the demonstration effect has two forms: first, the consumption level and pattern of countries with higher income level and its evolution have a demonstration effect on the consumption pattern of countries with lower income level; Second, the high-income groups in high-income countries and low-income countries have exemplary effects on the consumption patterns of low-income groups.
The demonstration effect has an impact on the trade pattern of developed countries. Some products such as durable consumer goods produced in high-income countries may be absorbed by relatively high-income consumer groups in low-income countries after meeting domestic demand. With the economic growth and the improvement of income level in low-income countries, the demand for saturated or even declining products in high-income countries will continue to exist. From this perspective, the demonstration effect strengthens the original trade pattern of high-income countries and slows down the evolution of the trade pattern of developed countries. If it is a demonstration effect within developed countries, it will be conducive to the upgrading of consumption structure, industrial structure and trade model.
The impact of demonstration effect on the trade pattern of developing countries is manifested in two aspects: first, low-income countries imitate high-income countries in consumption patterns, while the demand for high-end consumer goods in low-income countries is not based on the development of their corresponding industries. At this time, high consumption will reduce savings and hinder capital accumulation, which is not conducive to the upgrading of industrial structure and trade structure. However, manufacturers in developing countries are facing strong competition from developed countries from the beginning when they pursue their representative needs. From this point of view, the demonstration effect inhibits the evolution speed of developing countries' trade patterns. Second, when low-income countries imitate the consumption patterns of high-income countries, they will stimulate the transformation of domestic production structure and ultimately promote the evolution of trade patterns in developing countries. To develop a new product, enterprises have to invest a lot of manpower and material resources in development, testing and production, but whether the market accepts the product is very important for its industrialization. High-income countries are at the forefront of the consumption wave, and their manufacturers have to bear the market risk of launching new consumer goods. Because of the demonstration effect of consumption, low-income countries can cultivate and create their own demand for a new type of consumer goods by importing consumer goods from developed countries, while the export of consumer goods from developed countries has cultivated the demand of developing countries to produce the same type of consumer goods. With the increase of domestic demand scale, it will stimulate domestic manufacturers to imitate the production of such products, and with the maturity of technology and the emergence of economies of scale, the production cost will be greatly reduced, the international competitiveness will be continuously improved, and finally the internationalization of production and sales will be realized, and finally the trade pattern of developing countries will be transformed.
Second, changes in demand and terms of trade.
John? In the book Principles of Political Economy and Its Application in Social Philosophy published by 1848, Mill put forward the principle of mutual demand to explain the decisive reasons of terms of trade from the perspective of demand. He believes that the terms of trade and their changes mainly depend on the intensity of mutual demand between the two countries for goods from trading partners. Within the upper and lower limits of the proportion of international commodity exchange, the stronger a country's demand for export commodities from partner countries, the weaker the demand for export commodities from partner countries, the more unfavorable the terms of trade are for the country, and the less benefits it gets from foreign trade; On the contrary, the more the country benefits. The closer the proportion of international exchange is to the proportion of domestic exchange, it shows that the closer the volume of goods exchanged internationally is to the domestic production before the division of labor exchange, the less trade benefits China will get. The closer the international commodity exchange rate is to the domestic exchange rate of the other country, the more favorable it is to the country and the greater the trade benefits.
Third, the interaction between foreign trade and consumer demand.
Export trade will also have an important impact on income level and consumption structure. On the one hand, the growth of export trade will expand the market of export commodities, give full play to the economies of scale of production and increase the international competitiveness of this product. The expansion of exports will also promote the development of some industries related to export industries. For example, the growth of automobile export will promote the development of steel industry, glass industry, rubber industry, plastic industry and other automobile-related industries. In addition, the development of export trade will also drive the development of infrastructure and public utilities. Such as transportation, communication, power supply, water supply, finance, insurance and various personal service industries will develop accordingly; On the other hand, according to Keynes's foreign trade multiplier theory, in the case of idle resources, the growth of export trade can expand employment, increase national income, improve domestic consumption level and promote the upgrading of domestic consumption structure.
The impact of import trade on income and consumption structure: On the one hand, from the perspective of consumption, domestic consumers will face more consumption choices through international trade, which will break the original consumption structure. When the income level is fixed, the decrease of residents' consumption demand for domestic products will lead to the increase of imported consumer goods. Imported new products will drive consumers' consumption preferences to shift to these new products, and the growing domestic demand for these new products provides important conditions for domestic manufacturers to produce these new products; On the other hand, importing new machinery and equipment and introducing new technologies will improve the domestic technical level, adjust the industrial structure and further change the induced consumption structure. At the same time, imports also play an important role in stabilizing the domestic price level.
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