The Global Economy and International Trade

Topics: International trade, Export, Economics Pages: 5 (1366 words) Published: March 31, 2014
The Global Economy and International Trade

What Is International Trade
International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product (GDP). While international trade has been present throughout much of history, its economic, social, and political importance has been on the rise in recent centuries. Increasing international trade is crucial to the continuance of globalization. Without international trade, nations would be limited to the goods and services produced within their own borders.

The Importance Of International Trade To The US Economy
America cannot have a growing economy or lift the wages and incomes of its citizens unless it continue to reach beyond its borders and sell products, produce, and services to the 95% of the world's population that lives outside the United States.

Figure 1 Export as a Percentage of US GDP(Source: World Trade Organization, www.wto.org) As the third largest exporter in the world, United States exports always take 8 to 10 percentage of US GDP and 7 to 8 percentage in world share. In the past fifty years, the United States has grown deeply involved in the world economy: foreign trade accounts for the proportion of GDP is 30%; Top 500 enterprises have 50% of the income from international business; 50% of government debt is held by foreign investors. The United States is earning huge returns from globalization. Because of trade liberalization, the increase revenue each year in the United States is more than $10000, which is equivalent to more than 10% of the national income. Labor force, capital, land, technology and other factors of production in each country's distribution is always not balanced. Some countries have surplus labor force but lack capital. Some countries have abundance capital but shortage of land. Some countries’ land is vast but agricultural technology lag behind. Since the twentieth century, through the international trade by using capital transfer, land leasing, technology trade, etc. America used its advantaged or surplus factors of production to exchange other countries’ shortage factors of production so that the restricted of the shortage of factors of production would be alleviated or eliminated. Thus the surplus factor of production could be made full use of, enlarge the production scale and accelerate economic development. For example, the car Pontiac Le Mans of General Motors company cannot be simple defined as a USA product. It’s assembled in South Korea. The engine, axle and circuit is provided by Japan. It’s designed in Germany. Other parts come from Taiwan, Singapore and Japan. Spain provides advertising and marketing services. Data processing is completed in Ireland and Barbados. And strategy research, lawyers, bank, insurance is respectively provided by Detroit, New York and Washington. Only about 40% of the total cost occurred in the United States.

The Rapid Growth Of International Trade Since WWII
After the WWII, international trade has made rapid development. From 1950 to1973, international trade raised from $60 billion to $574 billion, increasing by 8.5 times with an average annual growth rate of 10.3%. This growing rate is faster than the most rapidly growing level international trade history. This rapid development is mainly because of the rapid growing of the world economy after war. ● A Long Time of Peace

Although the rivalry between the east and west two camps still exist, after all, cold war is not like the military war that has a direct damage to economy. Both east and west has an economic group and their competition plays a positive role in promoting the economic development in some level. From the 50’s to the 80’s, the proportion of total export for western industrial countries in the world share increased from 7.7% to 26.8%. In the early 90’s after the end of the cold war, the improvement of...

Citations: ● “International Trade and Exchange Rates.”Stanley, L.Brue, Campbell, R.McConnell and Sean, M.Flynn. Essentials of Economics.2e. New York: McGraw,2010.443-461
● Brock R. Williams and J. Michael Donnelly ”U.S. International Trade: Trends and Forecasts”. Congressional Research Service. RL33577. October 19, 2012. 13-15
● “International Trade” en.wikipedia.org. Ltd 19 Feb 2013. Wikipedia. 20 Feb 2013.
● “International Trade and Market Access Data”. www.wto.org. 19 Feb 2013.
● Andrew G. Terborgh. “The Post-War Rise of World Trade: Does the Bretton Woods System Deserve Credit?”. London School of Economics. Sep 2003. 26-27
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