The globalization of international trade
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Description:
After the 1970s, international trade including goods and services between countries, experienced a notable growth. The volume of exchanged goods and services between nations is taking significant part in the generation of wealth. By 2003, international trade was accounting for about 15% of the global GDP, a twofold increase since 1950.
Enablers:
- The more flexible and embedded production systems encourages exchanges of commodities and services.
- Transport costs declined greatly due to the innovation processes and a growth of the efficiency of modes and infrastructures. As a result, the transferability of commodities has improved.
- Integration processes such as the emergence of economic blocks and the decrease of tariffs at a global scale, promoted trade. The higher the level of economic integration, the more likely the concerned elements are to trade. The transactional capacity is consequently facilitated with the development of transportation networks and the adjustment of trade flows that follows increased integration.
Inhibitors:
- The fear of too specialized and unfairness of the local governments may lead them to legislate laws preventing international trade.
- High tariffs, quotas, and other public policy interventions.
Paradigms:
- Barriers to international trade have been considerably lowered since World War II through international agreements such as the General Agreement on Tariffs and Trade (GATT). Particular initiatives carried out as a result of GATT and the WTO, for which GATT is the foundation, have included two aspects. The first one is promotion of free trade of goos through reducing or eliminating tariffs,and constructing free trade zones with small or no tariffs and capital. The second one is the promotion of capital through reducing or elimiating capital controls.
- The value of world merchandise trade reached about $5.5 trillion in 1997. In 1990 it was less than $3.5 trillion. In 1990 developed countries accounted for over 70% of the total but by 1997 their share had dropped below 64%. The share lost shifted mainly to developing countries.
- World output grew in real terms at an average annual rate of 3.7% between 1948 and 1997 compared with world trade growth of 6%. Between 1950 and 1997, international trade flows multiplied by a factor of 17, while output increased six-fold.