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Gross National Product

GNP Top 10 (2004) (currency exchange rate)

Country GNP ($ mill)

1 United States

10,945,792

2 Japan

4,389,791

3 Germany

2,084,631

4 United Kingdom

1,680,300

5 France

1,523,025

6 China

1,417,301

7 Italy

1,242,978

8 Canada

756,770

9 Spain

698,208

10 Mexico

637,159

Gross National Product (GNP) is the total value of final goods and services produced in a year by domestically owned factors of production.

Final goods are goods that are ultimately consumed rather than used in the production of another good. For example, a car sold to a consumer is a final good; the components such as tires sold to the car manufacturer are not; they are intermediate goods used to make the final good. The same tires, if sold to a consumer, would be a final good. Only final goods are included when measuring national income. If intermediate goods were included too, this would lead to double counting; for example, the value of the tires would be counted once when they are sold to the car manufacturer, and again when the car is sold to the consumer.

Only newly produced goods are counted. Transactions in existing goods, such as second-hand cars, are not included, as these do not involve the production of new goods.

Income is counted as part of GNP according to who owns the factors of production rather than where the production takes place. For example, in the case of a German-owned car factory operating in the US, the profits from the factory would be counted as part of German GNP rather than US GNP because the capital used in production (the factory, machinery, etc.) is German owned. The wages of the American workers would be part of US GNP, while the wages of any German workers on the site would be part of German GNP.

Gross Domestic Product

GDP Top 10 (2004) (currency exchange rate)

Country GDP ($ mill)

1 United States 10,435,284

2 China 5,409,852

3 Japan 4,326,444

4 Germany 2,400,655

5 United Kingdom 1,794,858

6 France 1,747,973

7 Italy 1,465,895

8 Canada 958,390

9 Spain 836,100

10 Mexico 626,888

Gross Domestic Product (GDP) is the total value of final goods and services produced within a country's borders in a year.

GDP counts income according to where it is earned rather than who owns the factors of production. In the above example, all of the income from the car factory would be counted as US GDP rather than German GDP.

To convert from GNP to GDP you must subtract factor income receipts from foreigners that correspond to goods and services produced abroad using factor inputs supplied by domestic sources. To convert from GDP to GNP you must add factor input payments to foreigners that correspond to goods and services produced in the domestic country using the factor inputs supplied by foreigners.

GDP is a better measure of the state of production in the short term. GNP is better when analysing sources and uses of income.

Exports

In economics, an export is any good or commodity, shipped or otherwise transported out of a country, province, town to another part of the world, typically for use in trade or sale. Export products or services are provided to foreign consumers by domestic producers.

Export is the legitimate transportation of domestic or nationalized goods and services from a country intended for use or consumption rendered abroad. Exports can be any good that is shipped out of a government's border for commercial purposes. Exports are usually carried out under specific conditions.

International trade

International trade is defined as trade between two or more partners from different countries (an exporter and an importer). Early international trade consisted mostly of barter transactions.

International trade is also a branch of economics. Traditionally, international trade is justified in economics by comparative advantage theory. New developments include in patterns of international trade: the integration of countries into trade blocs (e.g., European Union, NAFTA, EFTA, CEFTA) and globalisation.

Regulation of international trade

Traditionally trade was regulated through bilateral treaties between two nations. For centuries under the belief in Mercantilism most nations had high tariffs and many restrictions on international trade. In the nineteenth century, especially in Britain, a belief in free trade became paramount and this view has dominated thinking among western nations for most of the time since then. In the years since the Second World War multilateral treaties like the GATT and World Trade Organization have attempted to create a globally regulated trade structure.

Communist and socialist nations often believe in autarchy, a complete lack of international trade. Fascist governments also placed great emphasis on self-sufficiency. No nation can meet all of its people's needs, however, and every state engages in some trade.

Free trade is usually most strongly supported by the most economically powerful nation in the world. The Netherlands and the United Kingdom were both strong advocates of free trade when they were on top, today it is the United States which is its greatest proponent.

* This is not completely true. UK, in its height observed mercantilist policy. Today, the highest tariff rates are found among the most industrialized