Section ISection IOverview of International Trade

Growth and Direction of International Trade

Trade and exchange rate regimePresence of an entrepreneurial classEfficiency-enhancing government policySecure access to transport and marketing

services

Determinants of TradeDeterminants of Trade

Importance of international trade: Access to new products and services, markets, cost advantages, and advanced technical methods abroad. Trade increases incomes and employment. It is estimated that each billion dollars of exported merchandise supports 25,000 jobs.

Growth in exports: World merchandise trade has always exceeded the growth of output (except for 1913–1950).

Volume and Direction of TradeVolume and Direction of Trade

Volume of trade: The volume of world trade in 2004 was about three times what it was in 1990 and approached 11 trillion U.S. dollars. Some of the major factors for this increase include increased incomes due to the expanding middle class in many countries, trade liberalization, and new technologies that assist in the physical integration of world markets.

Volume and Direction of Trade Volume and Direction of Trade (cont.)(cont.)

Direction of trade: Industrial countries account for the largest share (67 percent) of world trade. They also account for major shares of trade with developing and transitional countries.

Volume and Direction of Trade Volume and Direction of Trade (cont.)(cont.)

Uruguay Round (1994)Establishment of WTO as permanent agency of the

United Nations with responsibility for international trade

Jurisdiction of WTO extended to services, intellectual property rights

Increase in the establishment of regional trading blocs (common markets, free-trade areas) between countries

Important Developments in TradeImportant Developments in Trade

Growth in services trade largely due to liberalization and the advent of communication and information technology

Developing nations in world trade: In 2004, developing countries accounted for more than a third of the world’s top 25 exporters and importers. Another significant development is the opening up of China and eastern Europe for trade and investment.

Important Developments in TradeImportant Developments in Trade(cont.)(cont.)