Recent Trends in Global Trade Umera

7/23/2019 Recent Trends in Global Trade Umera

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RECENT TRENDS IN GLOBAL TRADE

INTRODUCTION

Trade globalization is a type of economic globalization and a meas!e "economic

indicato!# of economic integ!ation$ On a national scale% it loosely !ep!esents t&e

p!opo!tion of all p!odction t&at c!osses t&e bonda!ies of a cont!y% as 'ell as t&e

nmbe! of (obs in t&at cont!y dependent pon e)te!nal t!ade$ On a global scale% it

!ep!esents t&e p!opo!tion of all 'o!ld p!odction t&at is sed fo! impo!ts and e)po!ts

bet'een cont!ies$

*o! an individual country% t!ade globalization is meas!ed as t&e p!opo!tion of

t&at cont!y+s total ,olme of t!ade to itsG!oss Domestic -!odct"GD-#./01

*o! the world as a whole% t!ade globalization is t&e s&a!e of total 'o!ld t!ade in

total 'o!ld p!odction "GD-#% '&e!e t&e sms a!e ta2en o,e! all cont!ies. /31

DEFINITION

-!eye! and B4s p!o,ide a simple ope!ationalization of t!ade globalization as 5t&ep!opo!tion of all 'o!ld p!odction t&at c!osses inte!national bonda!ies5$/31C&ase6Dnn

et al$ note t&at t!ade globalization is one of t&e types of economic globalization% and

define t!ade globalization as 5t&e e)tent to '&ic& t&e long6distance and global e)c&ange

of commodities &as inc!eased "o! dec!eased# !elati,e to t&e e)c&ange of commodities

'it&in national societies5% and p!ecisely ope!ationalize it as 5t&e sm of all inte!national

e)po!ts as a pe!centage of t&e global p!odct% '&ic& is t&e sm of all t&e national g!oss

domestic p!odcts "GD-s#$5/71E!!eyge!s and 8e!mei!e define t!ade globalization as 5t&e

deg!ee of dissimila!ity bet'een t&e actal dist!ibtion of bilate!al t!ade flo's and t&ei!

g!a,ity benc&ma!2% dete!mined only by size and distance$5 /91 T&ey note t&at t!ade

globalization 'old be ma)imized in a sitation '&e!e only size and distance affected t&e

intensity of bilate!al t!ade flo's 6 in ot&e! 'o!ds% in a sitation '&e!e neit&e! t!ade

ba!!ie!sno! ot&e! facto!s 'old matte!$
https://en.wikipedia.org/wiki/Economic_globalizationhttps://en.wikipedia.org/wiki/Economic_indicatorhttps://en.wikipedia.org/wiki/Economic_indicatorhttps://en.wikipedia.org/wiki/Economic_integrationhttps://en.wikipedia.org/wiki/Gross_Domestic_Producthttps://en.wikipedia.org/wiki/Gross_Domestic_Producthttps://en.wikipedia.org/wiki/Trade_globalization#cite_note-Brady2011-1https://en.wikipedia.org/wiki/Trade_globalization#cite_note-PreyerB.C3.B6s2002-2https://en.wikipedia.org/wiki/Operationalizationhttps://en.wikipedia.org/wiki/Trade_globalization#cite_note-PreyerB.C3.B6s2002-2https://en.wikipedia.org/wiki/Economic_globalizationhttps://en.wikipedia.org/wiki/Trade_globalization#cite_note-dunn-3https://en.wikipedia.org/wiki/Gravity_model_of_tradehttps://en.wikipedia.org/wiki/Trade_globalization#cite_note-ErreygersVermeire2012-4https://en.wikipedia.org/wiki/Trade_barriershttps://en.wikipedia.org/wiki/Trade_barriershttps://en.wikipedia.org/wiki/Economic_indicatorhttps://en.wikipedia.org/wiki/Economic_indicatorhttps://en.wikipedia.org/wiki/Economic_integrationhttps://en.wikipedia.org/wiki/Gross_Domestic_Producthttps://en.wikipedia.org/wiki/Trade_globalization#cite_note-Brady2011-1https://en.wikipedia.org/wiki/Trade_globalization#cite_note-PreyerB.C3.B6s2002-2https://en.wikipedia.org/wiki/Operationalizationhttps://en.wikipedia.org/wiki/Trade_globalization#cite_note-PreyerB.C3.B6s2002-2https://en.wikipedia.org/wiki/Economic_globalizationhttps://en.wikipedia.org/wiki/Trade_globalization#cite_note-dunn-3https://en.wikipedia.org/wiki/Gravity_model_of_tradehttps://en.wikipedia.org/wiki/Trade_globalization#cite_note-ErreygersVermeire2012-4https://en.wikipedia.org/wiki/Trade_barriershttps://en.wikipedia.org/wiki/Trade_barriershttps://en.wikipedia.org/wiki/Economic_globalization


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Babones notes t&at t!ade globalization is t&e indicato! of a cont!y+s le,el of globalization

most commonly sed in empi!ical lite!at!e$/:1Data fo! most cont!ies in t&e mode!n e!a

a!e a,ailable f!om t&e ;o!ld Ban2;o!ld De,elopment Indicato!sdatabase$

TREND

C&ase6Dnn et al$ note t&at t&e!e &a,e been cyclical 'a,es of t!ade globalization% 'it&

declines co!!esponding to 'a!s and economic dep!essions% and t&at t&e!e &as been a

steady t!end o,e! t&e cent!ies fo! t!ade globalization to inc!ease$/71;it& !ega!ds to t&e

mode!n age% t!ade globalization inc!eased ntil 009% dec!eased d!ing ;o!ld ;a! I% inc!eased ntil 0>3>%

dec!eased ntil t&e end of ;o!ld ;a! II% and &as been g!o'ing steadily since$/71T&ey note

t&at t&e main e)planato!y facto!s in t&is t!end a!e t&e contined decline in t!anspo!tation

and commnication costs% and stability p!o,ided by t&e 5&egemonic system5 sppo!ti,e

of t!ade in !ecent 'o!ld6systems$/71Dec!eases can be e)plained by 'a!s% and pe!iods of

conflict and tension often leading to t&em% '&e!e inte!national acto!s cannot !eac&

consenss on t!ade ag!eements and sally gi,e into to p!otectionism
https://en.wikipedia.org/wiki/Trade_globalization#cite_note-Ritzer2008-5https://en.wikipedia.org/wiki/World_Bankhttps://en.wikipedia.org/wiki/World_Development_Indicatorshttps://en.wikipedia.org/wiki/World_Development_Indicatorshttps://en.wikipedia.org/wiki/Trade_globalization#cite_note-dunn-3https://en.wikipedia.org/wiki/World_War_Ihttps://en.wikipedia.org/wiki/World_War_IIhttps://en.wikipedia.org/wiki/Trade_globalization#cite_note-dunn-3https://en.wikipedia.org/wiki/Hegemonyhttps://en.wikipedia.org/wiki/World-systemshttps://en.wikipedia.org/wiki/Trade_globalization#cite_note-dunn-3https://en.wikipedia.org/wiki/Trade_globalization#cite_note-dunn-3https://en.wikipedia.org/wiki/Trade_globalization#cite_note-Ritzer2008-5https://en.wikipedia.org/wiki/World_Bankhttps://en.wikipedia.org/wiki/World_Development_Indicatorshttps://en.wikipedia.org/wiki/Trade_globalization#cite_note-dunn-3https://en.wikipedia.org/wiki/World_War_Ihttps://en.wikipedia.org/wiki/World_War_IIhttps://en.wikipedia.org/wiki/Trade_globalization#cite_note-dunn-3https://en.wikipedia.org/wiki/Hegemonyhttps://en.wikipedia.org/wiki/World-systemshttps://en.wikipedia.org/wiki/Trade_globalization#cite_note-dunn-3


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INTERNATIONAL TRADE

International tradeis t&e e)c&ange of capital% goods% and se!,icesac!oss inte!national

bo!de!s o! te!!ito!ies% '&ic& cold in,ol,e t&e acti,ities of t&e go,e!nment and

indi,idal$/01In most cont!ies% sc& t!ade !ep!esents a significant s&a!e of g!oss domestic

p!odct "GD-#$ ;&ile inte!national t!ade&as been p!esent t&!og&ot mc& of &isto!y

"see Sil2 Road% Ambe! Road% salt !oad#% its economic% social% and political impo!tance &as

been on t&e !ise in !ecent cent!ies$ It is t&e p!espposition of inte!national t!ade t&at a

sfficient le,el of geopoliticalpeace and stability a!e p!e,ailing in o!de! to allo' fo! t&e

peacefl e)c&ange of t!ade and comme!ce to ta2e place bet'een nations$

T!ading globally gi,es consme!s and cont!ies t&e oppo!tnity to be e)posed to ne'

ma!2ets and p!odcts$ Almost e,e!y 2ind of p!odct can be fond on t&e inte!national

ma!2et. food% clot&es% spa!e pa!ts% oil% (e'el!y% 'ine% stoc2s% c!!encies and 'ate!$

Se!,ices a!e also t!aded. to!ism% ban2ing% conslting and t!anspo!tation$ A p!odct t&at

is sold to t&e global ma!2et is an e)po!t% and a p!odct t&at is bog&t f!om t&e global

ma!2et is an impo!t$ Impo!ts and e)po!ts a!e acconted fo! in a cont!y+s c!!ent accont

in t&e balance of payments$

Ancient Silk Roadtrade routesacross Eurasia

Indst!ialization% ad,anced tec&nology% inclding t!anspo!tation% globalization%

mltinational co!po!ations% and otso!cing a!e all &a,ing a ma(o! impact on t&e

inte!national t!ade system$ Inc!easing inte!national t!ade is c!cial to t&e continance of

globalization$ ;it&ot inte!national t!ade% nations 'old be limited to t&e goods and

se!,ices p!odced 'it&in t&ei! o'n bo!de!s$ Inte!national t!ade is% in p!inciple% not

diffe!ent f!om domestic t!adeas t&e moti,ation and t&e be&a,io! of pa!ties in,ol,ed in a

t!ade do not c&ange fndamentally !ega!dless of '&et&e! t!ade is ac!oss a bo!de! o! not$
https://en.wikipedia.org/wiki/Capital_(economics)https://en.wikipedia.org/wiki/Good_(economics)https://en.wikipedia.org/wiki/Service_(economics)https://en.wikipedia.org/wiki/International_bordershttps://en.wikipedia.org/wiki/International_bordershttps://en.wikipedia.org/wiki/International_trade#cite_note-1https://en.wikipedia.org/wiki/Gross_domestic_producthttps://en.wikipedia.org/wiki/Gross_domestic_producthttps://en.wikipedia.org/wiki/Tradehttps://en.wikipedia.org/wiki/Silk_Roadhttps://en.wikipedia.org/wiki/Amber_Roadhttps://en.wikipedia.org/wiki/Salt_roadhttps://en.wikipedia.org/wiki/International_trade_and_state_securityhttps://en.wikipedia.org/wiki/Exporthttps://en.wikipedia.org/wiki/Importhttps://en.wikipedia.org/wiki/Silk_Roadhttps://en.wikipedia.org/wiki/Trade_routeshttps://en.wikipedia.org/wiki/Eurasiahttps://en.wikipedia.org/wiki/Industrializationhttps://en.wikipedia.org/wiki/Transporthttps://en.wikipedia.org/wiki/Globalizationhttps://en.wikipedia.org/wiki/Multinational_corporationhttps://en.wikipedia.org/wiki/Outsourcinghttps://en.wikipedia.org/wiki/Domestic_tradehttps://en.wikipedia.org/wiki/Capital_(economics)https://en.wikipedia.org/wiki/Good_(economics)https://en.wikipedia.org/wiki/Service_(economics)https://en.wikipedia.org/wiki/International_bordershttps://en.wikipedia.org/wiki/International_bordershttps://en.wikipedia.org/wiki/International_trade#cite_note-1https://en.wikipedia.org/wiki/Gross_domestic_producthttps://en.wikipedia.org/wiki/Gross_domestic_producthttps://en.wikipedia.org/wiki/Tradehttps://en.wikipedia.org/wiki/Silk_Roadhttps://en.wikipedia.org/wiki/Amber_Roadhttps://en.wikipedia.org/wiki/Salt_roadhttps://en.wikipedia.org/wiki/International_trade_and_state_securityhttps://en.wikipedia.org/wiki/Exporthttps://en.wikipedia.org/wiki/Importhttps://en.wikipedia.org/wiki/Silk_Roadhttps://en.wikipedia.org/wiki/Trade_routeshttps://en.wikipedia.org/wiki/Eurasiahttps://en.wikipedia.org/wiki/Industrializationhttps://en.wikipedia.org/wiki/Transporthttps://en.wikipedia.org/wiki/Globalizationhttps://en.wikipedia.org/wiki/Multinational_corporationhttps://en.wikipedia.org/wiki/Outsourcinghttps://en.wikipedia.org/wiki/Domestic_trade


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T&e main diffe!ence is t&at inte!national t!ade is typically mo!e costly t&an domestic

t!ade$ T&e !eason is t&at a bo!de! typically imposes additional costs sc& as ta!iffs% time

costs de to bo!de! delays and costs associated 'it& cont!y diffe!ences sc& as langage%

t&e legal system o! clt!e$

Anot&e! diffe!ence bet'een domestic and international trade is t&at facto!s of

p!odction sc& as capital and labo!a!e typically mo!e mobile 'it&in a cont!y t&an

ac!oss cont!ies$ T&s inte!national t!ade is mostly !est!icted to t!ade in goods and

se!,ices% and only to a lesse! e)tent to t!ade in capital% labo! o! ot&e! facto!s of

p!odction$ T!ade in goods and se!,ices can se!,e as a sbstitte fo! t!ade in facto!s of

p!odction$ Instead of impo!ting a facto! of p!odction% a cont!y can impo!t goods t&at

ma2e intensi,e se of t&at facto! of p!odction and t&s embody it$ An e)ample is t&eimpo!t of labo!6intensi,e goods by t&e ?nited States f!om C&ina$ Instead of impo!ting

C&inese labo!% t&e ?nited States impo!ts goods t&at 'e!e p!odced 'it& C&inese labo!$

One !epo!t in 3=0= sggested t&at inte!national t!ade 'as inc!eased '&en a cont!y

&osted a net'o!2 of immig!ants% bt t&e t!ade effect 'as 'ea2ened '&en t&e immig!ants

became assimilated into t&ei! ne' cont!y$

Inte!national t!ade is also a b!anc& of economics% '&ic&% toget&e! 'it& inte!national

finance%fo!ms t&e la!ge! b!anc& called inte!national economics$ T!ading is a ,ale6added

fnction. it is t&e economic p!ocess by '&ic& a p!odct finds its ma!2et% in '&ic& specific

!is2s a!e to be bo!ne by t&e t!ade!$
https://en.wikipedia.org/wiki/Tariffhttps://en.wikipedia.org/wiki/Factors_of_productionhttps://en.wikipedia.org/wiki/Factors_of_productionhttps://en.wikipedia.org/wiki/Labor_economicshttps://en.wikipedia.org/wiki/Economicshttps://en.wikipedia.org/wiki/International_financehttps://en.wikipedia.org/wiki/International_financehttps://en.wikipedia.org/wiki/International_economicshttps://en.wikipedia.org/wiki/Tariffhttps://en.wikipedia.org/wiki/Factors_of_productionhttps://en.wikipedia.org/wiki/Factors_of_productionhttps://en.wikipedia.org/wiki/Labor_economicshttps://en.wikipedia.org/wiki/Economicshttps://en.wikipedia.org/wiki/International_financehttps://en.wikipedia.org/wiki/International_financehttps://en.wikipedia.org/wiki/International_economics


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HISTORY

Roman t!ade 'it& Indiaacco!ding to t&e -e!ipls @a!is E!yt&!aei% 0st cent!y CE$

T&e &isto!y of inte!national t!adec&!onicles notable e,ents t&at &a,e affected t&e t!ade

bet'een ,a!ios cont!ies$

In t&e e!a befo!e t&e !ise of t&e nation state% t&e te!m +inte!national+ t!ade cannot be

lite!ally applied% bt simply means t!ade o,e! long distances t&e so!t of mo,ement in

goods '&ic& 'old !ep!esent inte!national t!ade in t&e mode!n 'o!ld$

Models

T&e follo'ing a!e noted models of inte!national t!ade$/91

Adam Smit!s model

Adam Smit&displays t!ade ta2ing place on t&e basis of cont!ies e)e!cising absolte

ad,antageo,e! one anot&e!$/:1/1
https://en.wikipedia.org/wiki/Roman_trade_with_Indiahttps://en.wikipedia.org/wiki/Periplus_Maris_Erythraeihttps://en.wikipedia.org/wiki/History_of_international_tradehttps://en.wikipedia.org/wiki/Nation_statehttps://en.wikipedia.org/wiki/International_trade#cite_note-4https://en.wikipedia.org/wiki/Adam_Smithhttps://en.wikipedia.org/wiki/Absolute_advantagehttps://en.wikipedia.org/wiki/Absolute_advantagehttps://en.wikipedia.org/wiki/International_trade#cite_note-encyclopedia_1-5https://en.wikipedia.org/wiki/International_trade#cite_note-encyclopedia_1-5https://en.wikipedia.org/wiki/International_trade#cite_note-princeton-6https://en.wikipedia.org/wiki/Roman_trade_with_Indiahttps://en.wikipedia.org/wiki/Periplus_Maris_Erythraeihttps://en.wikipedia.org/wiki/History_of_international_tradehttps://en.wikipedia.org/wiki/Nation_statehttps://en.wikipedia.org/wiki/International_trade#cite_note-4https://en.wikipedia.org/wiki/Adam_Smithhttps://en.wikipedia.org/wiki/Absolute_advantagehttps://en.wikipedia.org/wiki/Absolute_advantagehttps://en.wikipedia.org/wiki/International_trade#cite_note-encyclopedia_1-5https://en.wikipedia.org/wiki/International_trade#cite_note-princeton-6


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Ricardian model

T&e la' of compa!ati,e ad,antage 'as fi!st p!oposed by Da,id Rica!do$

T&e Rica!dian modelfocses on compa!ati,e ad,antage% '&ic& a!ises de to diffe!ences

in tec&nology o! nat!al !eso!ces$ T&e Rica!dian model does not di!ectly conside! facto!

endo'ments% sc& as t&e !elati,e amonts of labo! and capital 'it&in a cont!y$

T&e Rica!dian model is based on t&e follo'ing assmptions.

Labo! is t&e only p!ima!y inpt to p!odction

T&e !elati,e !atios of labo! at '&ic& t&e p!odction of one good can be t!aded off

fo! anot&e! diffe! bet'een cont!ies and go,e!nments

"EC#SC"ER$O"LIN %ODEL

In t&e ea!ly 0>==s a t&eo!y of inte!national t!ade 'as de,eloped by t'o S'edis&

economists% Eli ec2sc&e! and Be!til O&lin$ T&is t&eo!y &as sbseently been 2no'n as

t&e ec2sc&e!O&lin model "O model#$ T&e !eslts of t&e O model a!e t&at

cont!ies 'ill p!odce and e)po!t goods t&at !ei!e !eso!ces "facto!s# '&ic& a!e

!elati,ely abndant and impo!t goods t&at !ei!e !eso!ces '&ic& a!e in !elati,e s&o!t

spply$
https://en.wikipedia.org/wiki/David_Ricardohttps://en.wikipedia.org/wiki/Ricardian_economicshttps://en.wikipedia.org/wiki/Comparative_advantagehttps://en.wikipedia.org/wiki/Factor_endowmenthttps://en.wikipedia.org/wiki/Factor_endowmenthttps://en.wikipedia.org/wiki/Swedish_peoplehttps://en.wikipedia.org/wiki/Eli_Heckscherhttps://en.wikipedia.org/wiki/Bertil_Ohlinhttps://en.wikipedia.org/wiki/David_Ricardohttps://en.wikipedia.org/wiki/Ricardian_economicshttps://en.wikipedia.org/wiki/Comparative_advantagehttps://en.wikipedia.org/wiki/Factor_endowmenthttps://en.wikipedia.org/wiki/Factor_endowmenthttps://en.wikipedia.org/wiki/Swedish_peoplehttps://en.wikipedia.org/wiki/Eli_Heckscherhttps://en.wikipedia.org/wiki/Bertil_Ohlin


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In t&e ec2sc&e!O&lin model t&e patte!n of inte!national t!ade is dete!mined by

diffe!ences infacto! endo'ments$ It p!edicts t&at cont!ies 'ill e)po!tt&ose goodst&at

ma2e intensi,e se of locally abndant facto!s and 'ill impo!t goods t&at ma2e intensi,e

se of facto!s t&at a!e locally sca!ce$ Empi!ical p!oblems 'it& t&e O model% sc& as

t&e Leontief pa!ado)% 'e!e noted in empi!ical tests by ;assily Leontief '&o fond t&at

t&e ?nited States tended to e)po!t labo!6intensi,e goods despite &a,ing an abndance of

capital$

T&e O model ma2es t&e follo'ing co!e assmptions.

Labo! and capital flo' f!eely bet'een secto!s

T&e amont of labo! and capital in t'o cont!ies diffe! "diffe!ence in

endo'ments#

Tec&nology is t&e same among cont!ies "a long6te!m assmption#

Tastesa!e t&e same

Applicability

In 0>:7% ;assily Leontief pblis&ed a stdy in '&ic& &e tested t&e ,alidity of t&e

ec2sc&e!6O&lin t&eo!y$/F1T&e stdy s&o'ed t&at t&e ?nited States 'as mo!e abndant in

capital compa!ed to ot&e! cont!ies% t&e!efo!e t&e ?nited States 'old e)po!t capital6

intensi,e goods and impo!t labo!6intensi,e goods$ Leontief fond ot t&at t&e ?nited

States+ e)po!ts 'e!e less capital intensi,e t&an its impo!ts$

Afte! t&e appea!ance of Leontief+s pa!ado)% many !esea!c&e!s t!ied to sa,e t&e ec2sc&e!6

O&lin t&eo!y% eit&e! by ne' met&ods of meas!ement% o! by ne' inte!p!etations$

Leame!/


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!gman and Obstfeld and Bo'en% ollande! and 8iane% a!e negati,e abot t&e ,alidity

of 6O model$/031/071 Afte! e)amining t&e long &isto!y of empi!ical !esea!c&% Bo'en%

ollande! and 8iane conclded. 5Recent tests of t&e facto! abndance t&eo!y /6O t&eo!y

and its de,eloped fo!m into many6commodity and many6facto! case1 t&at di!ectly

e)amine t&e 6O68 eations also indicate t&e !e(ection of t&e t&eo!y$

In t&e specific facto!s model% labo! mobility among indst!ies is possible '&ile capital is

assmed to be immobile in t&e s&o!t !n$ T&s% t&is model can be inte!p!eted as a s&o!t6

!n ,e!sion of t&e ec2sc&e!6O&lin model$ T&e 5specific facto!s5 name !efe!s to t&e

assmption t&at in t&e s&o!t !n% specific facto!s of p!odction sc& as p&ysical capital

a!e not easily t!ansfe!able bet'een indst!ies$ T&e t&eo!y sggests t&at if t&e!e is an

inc!ease in t&e p!ice of a good% t&e o'ne!s of t&e facto! of p!odction specific to t&at

good 'ill p!ofit in !eal te!ms$

E)ample. *inland p!odces ocean c!ise!s and leat&e! p!odcts sc& as !eindee! f!% min2

and fo) coats$Lapland% t&e no!t&e!n pa!t of *inland% is spa!sely in&abited by mostly

Indians '&o &nt t&ese 'ild animals$ T&is cold climate o! fo!est is a facto! specific in t&e

leat&e! goods indst!y$

In t&e !ban a!eas *inns a!e also engaged in c!ise s&ip bilding and *inland e)po!ts

c!ise!s to E!opean cont!ies$ In addition to 'ell edcated 'o!2e!s% t&e s&ip bilding

indst!y !ei!es a la!ge amont of capital% '&ic& is specific to t&at indst!y in t&at it

cannot be sed in t&e leat&e! goods indst!y$ *innis& 'o!2e!s a!e mobile bet'een t&e t'o

indst!ies$
https://en.wikipedia.org/wiki/International_trade#cite_note-12https://en.wikipedia.org/wiki/International_trade#cite_note-Bowen98-13https://en.wikipedia.org/wiki/International_trade#cite_note-Bowen98-13https://en.wikipedia.org/wiki/International_trade#cite_note-12https://en.wikipedia.org/wiki/International_trade#cite_note-Bowen98-13


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Additionally% o'ne!s of opposing specific facto!s of p!odction "i$e$% labo! and capital#

a!e li2ely to &a,e opposing agendas '&en lobbying fo! cont!ols o,e! immig!ation of

labo!$ Con,e!sely% bot& o'ne!s of capital and labo! p!ofit in !eal te!ms f!om an inc!ease

in t&e capital endo'ment$ T&is model is ideal fo! nde!standing income dist!ibtion bt

a'2'a!d fo! discssing t&e patte!n of t!ade$
https://en.wikipedia.org/wiki/Lobbyinghttps://en.wikipedia.org/wiki/Lobbying


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NEW TRADE THEORY

Ne' T!ade T&eo!y t!ies to e)plain empi!ical elements of t!ade t&at compa!ati,e

ad,antage6based models abo,e &a,e difficlty 'it&$ T&ese inclde t&e fact t&at most

t!ade is bet'een cont!ies 'it& simila! facto! endo'ment and p!odcti,ity le,els% and t&e

la!ge amont of mltinational p!odction "i$e$% fo!eign di!ect in,estment# t&at e)ists$ Ne'

T!ade t&eo!ies a!e often based on assmptions sc& as monopolistic competition and

inc!easing !et!ns to scale$ One !eslt of t&ese t&eo!ies is t&e &ome6ma!2et effect% '&ic&

asse!ts t&at% if an indst!y tends to clste! in one location becase of !et!ns to scale and

if t&at indst!y faces &ig& t!anspo!tation costs% t&e indst!y 'ill be located in t&e cont!y

'it& most of its demand% in o!de! to minimize cost$

Alt&og& ne' t!ade t&eo!y can e)plain t&e g!o'ing t!end of t!ade ,olmes of

inte!mediate goods% !gman+s e)planation depends too mc& on t&e st!ict assmption

t&at all fi!ms a!e symmet!ical% meaning t&at t&ey all &a,e t&e same p!odction

coefficients$ S&ioza'a% based on mc& mo!e gene!al model% scceeded in gi,ing a ne'

e)planation on '&y t&e t!aded ,olme inc!eases fo! inte!mediate goods '&en t&e

t!anspo!t cost dec!eases$

&RA'IT( %ODEL

T&e G!a,ity model of t!ade p!esents a mo!e empi!ical analysis of t!ading patte!ns$ T&e

g!a,ity model% in its basic fo!m% p!edicts t!ade based on t&e distance bet'een cont!ies

and t&e inte!action of t&e cont!ies+ economic sizes$ T&e model mimics t&e Ne'tonianla' of g!a,ity'&ic& also conside!s distance and p&ysical size bet'een t'o ob(ects$ T&e

model &as been p!o,en to be empi!ically st!ong t&!og&economet!icanalysis$
https://en.wikipedia.org/wiki/Foreign_direct_investmenthttps://en.wikipedia.org/wiki/Monopolistic_competitionhttps://en.wikipedia.org/wiki/Returns_to_scalehttps://en.wikipedia.org/wiki/Home-market_effecthttps://en.wikipedia.org/wiki/Intermediate_goodhttps://en.wikipedia.org/wiki/Law_of_gravityhttps://en.wikipedia.org/wiki/Econometrichttps://en.wikipedia.org/wiki/Foreign_direct_investmenthttps://en.wikipedia.org/wiki/Monopolistic_competitionhttps://en.wikipedia.org/wiki/Returns_to_scalehttps://en.wikipedia.org/wiki/Home-market_effecthttps://en.wikipedia.org/wiki/Intermediate_goodhttps://en.wikipedia.org/wiki/Law_of_gravityhttps://en.wikipedia.org/wiki/Econometric


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Ricardian teor) o* international trade +modern de,elo-ment.

T&e Rica!dian t&eo!y of compa!ati,e ad,antage became a basic constitent of

neoclassical t!ade t&eo!y$ Any nde!g!adate co!se in t!ade t&eo!y incldes a

p!esentation of Rica!do+s e)ample of a t'o6commodity% t'o6cont!y model$ A common

!ep!esentation of t&is model is made sing anEdge'o!t& Bo)$

T&is model &as been e)panded to many6cont!y and many6commodity cases$ @a(o!

gene!al !eslts 'e!e obtained by @cenzie/0:1/01

and Hones%/0F1

inclding &is famosfo!mla$ It is a t&eo!em abot t&e possible t!ade patte!n fo! N6cont!y N6commodity

cases$

Contemporary theories

Rica!do+s idea 'as e,en e)panded to t&e case of continm of goods by Do!nbsc&%

*isc&e!% and Samelson/01

and ot&e!s$ T&ese t&eo!ies se a special p!ope!ty t&at is applicable only fo! t&e t'o6

cont!y case$

NEO/RICARDIAN TRADE T"EOR(

Inspi!ed by -ie!o S!affa% a ne' st!and of t!ade t&eo!y eme!ged and 'as named neo6

Rica!dian t!ade t&eo!y$ T&e main cont!ibto!s inclde Ian Steedman"0>90# and Stanley

@etcalfe "0>9#$ T&ey &a,e c!iticized neoclassical inte!national t!ade t&eo!y% namely t&e

ec2sc&e!6O&lin modelon t&e basis t&at t&e notion of capital as p!ima!y facto! &as no

met&od of meas!ing it befo!e t&e dete!mination of p!ofit !ate "t&s t!apped in a logical
https://en.wikipedia.org/wiki/Edgeworth_Boxhttps://en.wikipedia.org/wiki/International_trade#cite_note-15https://en.wikipedia.org/wiki/International_trade#cite_note-16https://en.wikipedia.org/wiki/International_trade#cite_note-17https://en.wikipedia.org/wiki/International_trade#cite_note-18https://en.wikipedia.org/wiki/International_trade#cite_note-19https://en.wikipedia.org/wiki/Piero_Sraffahttps://en.wikipedia.org/wiki/Ian_Steedmanhttps://en.wikipedia.org/wiki/Heckscher-Ohlin_modelhttps://en.wikipedia.org/wiki/Edgeworth_Boxhttps://en.wikipedia.org/wiki/International_trade#cite_note-15https://en.wikipedia.org/wiki/International_trade#cite_note-16https://en.wikipedia.org/wiki/International_trade#cite_note-17https://en.wikipedia.org/wiki/International_trade#cite_note-18https://en.wikipedia.org/wiki/International_trade#cite_note-19https://en.wikipedia.org/wiki/Piero_Sraffahttps://en.wikipedia.org/wiki/Ian_Steedmanhttps://en.wikipedia.org/wiki/Heckscher-Ohlin_model


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12


,icios ci!cle#$/3=1T&is 'as a second !ond of t&e Camb!idge capital cont!o,e!sy% t&is

time in t&e field of inte!national t!ade$

T&e me!it of neo6Rica!dian t!ade t&eo!y is t&at inpt goods a!e e)plicitly inclded$ T&is is

in acco!dance 'it& S!affa+s idea t&at any commodity is a p!odct made by means of

commodities$ T&e limitation of t&ei! t&eo!y is t&at t&e analysis is !est!icted to small6

cont!y cases$

TRADED INTER%EDIATE &OODS

Rica!dian t!ade t&eo!y o!dina!ily assmes t&at t&e labo! is t&e nie inpt$ T&is is a

g!eat deficiency as t!ade t&eo!y% fo! inte!mediate goods occpy t&e ma(o! pa!t of t&e

'o!ld inte!national t!ade$ eats/331 fond t&at 7=J of 'o!ld t!ade in manfact!ing

in,ol,es inte!mediate inpts$ Ba!d&an and Hafee /371fond t&at inte!mediate inpts occpy

7F to 7>3 and 0>>F% '&e!eas t&e pe!centage of int!a6

fi!m t!ade g!e' f!om 97J in 0>>3 to :3J in 0>>F$

@cenzie/391and Hones/3:1emp&asized t&e necessity to e)pand t&e Rica!dian t&eo!y to t&e

cases of t!aded inpts$ In a famos comment @cenzie "0>:9% p$ 0F># pointed t&at 5A

moment+s conside!ation 'ill con,ince one t&at Lancas&i!e 'old be nli2ely to p!odce

cotton clot& if t&e cotton &ad to be g!o'n in England$5 /31 -al Samelson/3F1 coined a

te!m Sraffa bonusto name t&e gains f!om t!ade of inpts$
https://en.wikipedia.org/wiki/International_trade#cite_note-20https://en.wikipedia.org/wiki/Cambridge_capital_controversyhttps://en.wikipedia.org/wiki/International_trade#cite_note-22https://en.wikipedia.org/wiki/International_trade#cite_note-23https://en.wikipedia.org/wiki/International_trade#cite_note-24https://en.wikipedia.org/wiki/International_trade#cite_note-25https://en.wikipedia.org/wiki/International_trade#cite_note-26https://en.wikipedia.org/wiki/Paul_Samuelsonhttps://en.wikipedia.org/wiki/Paul_Samuelsonhttps://en.wikipedia.org/wiki/International_trade#cite_note-27https://en.wikipedia.org/wiki/International_trade#cite_note-27https://en.wikipedia.org/wiki/International_trade#cite_note-20https://en.wikipedia.org/wiki/Cambridge_capital_controversyhttps://en.wikipedia.org/wiki/International_trade#cite_note-22https://en.wikipedia.org/wiki/International_trade#cite_note-23https://en.wikipedia.org/wiki/International_trade#cite_note-24https://en.wikipedia.org/wiki/International_trade#cite_note-25https://en.wikipedia.org/wiki/International_trade#cite_note-26https://en.wikipedia.org/wiki/Paul_Samuelsonhttps://en.wikipedia.org/wiki/International_trade#cite_note-27


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13


Ricardo-Sraffa trade theory

Economist Ho&n S$ C&ipman obse!,ed in &is s!,ey t&at @cenzie stmbled pon t&e

estions of inte!mediate p!odcts and postlated t&at 5int!odction of t!ade in

inte!mediate p!odct necessitates a fndamental alte!ation in classical analysis5$/3


14/45

14


Banglades&% pieces assembled in T&ailand and t&e final p!odct sold in t&e ?nited States

and E!ope to ma(o! b!ands$/791 In 0>>: Li K *ng Ltd p!c&ased Inc&cape Bying

Se!,ices% an establis&ed B!itis& t!ading company and 'idely e)panded p!odction in

Asia$/731Li K *ng spplies dozens of ma(o! !etaile!s% inclding ;al6@a!t Sto!es% Inc$%

b!anded as ;alma!t$

Free/Trade Teories

In fact% many cont!ies follo'ing me!cantilist policy t!ied to become as self6sfficient as

possible$ ;e discss t'o t&eo!ies sppo!ting f!ee t!ade. absolte ad,antage and

compa!ati,e ad,antage$ Bot& t&eo!ies &old t&at nations s&old neit&e! a!tificially limit

impo!ts no! p!omote e)po!ts$ T&e ma!2et 'ill dete!mine '&ic& p!odce!s s!,i,e as

consme!s by t&ose p!odcts t&at best se!,e t&ei! needs$ Bot& f!ee t!ade t&eo!ies imply

specialization$ Hst as indi,idals and families p!odce some t&ings t&at t&ey e)c&ange

fo! t&ings t&at ot&e!s p!odce% national specialization means p!odcing some t&ings fo!

domestic consmption and e)po!t '&ile sing t&e e)po!t ea!nings to by impo!ts of

p!odcts and se!,ices p!odced ab!oad$
https://en.wikipedia.org/wiki/International_trade#cite_note-McKinseyLiFung2002-34https://en.wikipedia.org/wiki/International_trade#cite_note-Cheng2001-32https://en.wikipedia.org/wiki/Walmarthttps://en.wikipedia.org/wiki/Absolute_advantagehttps://en.wikipedia.org/wiki/Comparative_advantagehttps://en.wikipedia.org/wiki/International_trade#cite_note-McKinseyLiFung2002-34https://en.wikipedia.org/wiki/International_trade#cite_note-Cheng2001-32https://en.wikipedia.org/wiki/Walmarthttps://en.wikipedia.org/wiki/Absolute_advantagehttps://en.wikipedia.org/wiki/Comparative_advantage


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15


LARGEST COUNTRIES Y TOTAL INTERNATIONAL TRA!E

8olme of 'o!ld me!c&andise e)po!ts

List of cont!ies by e)po!tsand List of cont!ies by impo!ts

Rank Countr) International Trade o*

&oods

+0illions o* USD.

Date o*

in*ormation

1 &D2

+nominal.

6 World 7F%F=$= 3=07 est$ :=$:J

6 E!opean ?nion 9%999$= 3=09 est$ 33$J

7 Ge!many 3% 3=09 est$


16/45

16


3= Tai'an :>:$: 3=09 est$ 003$:J

To" #$%ded &o''od(#(es )e*"o$#s+

Rank Commodit) 'alue in US3+!444. Date o*

in*ormation

0 @ine!al fels% oils% distillation p!odcts% etc$ 3%0%>90 3=03

3 Elect!ical% elect!onic eipment 0%


17/45

17


Data

O**icial statistics

Data on t&e ,ale of e)po!ts and impo!ts and t&ei! antities often b!o2en do'n by

detailed lists of p!odcts a!e a,ailable in statistical collections on inte!national t!ade

pblis&ed by t&e statistical se!,ices of inte!go,e!nmental and sp!anational o!ganisations

and national statistical instittes.

?nited Nations Commodity T!ade Database

;TO Statistics -o!tal

Statistical -o!tal. OECD

E!opean ?nion Inte!national T!ade in Goods Data

E!opean ?nion Inte!national T!ade in Se!,ices Data "sb6collection of t&e

Balance of paymentstatistics#

E!opean ?nion E)po!ts and Impo!ts "sb6collection of t&e National acconts

statistics#

*ood and Ag!iclt!al T!ade Databy *AO

B!azilian T!ade Data

T&e definitions and met&dological concepts applied fo! t&e ,a!ios statistical collections

on inte!national t!ade often diffe! in te!ms of definition "e$g$ special t!ade ,s$ gene!al

t!ade# and co,e!age "!epo!ting t&!es&olds% inclsion of t!ade in se!,ices% estimates fo!

smggled goods and c!oss6bo!de! p!o,ision of illegal se!,ices#$ @etadata p!o,iding

info!mation on definitions and met&ods a!e often pblis&ed along 'it& t&e data$

Other data sources

Reso!ces fo! data on t!ade%inclding t&e g!a,ity model

Asia6-acific T!ade Ag!eements Database "A-TIAD#

Asia6-acific Resea!c& and T!aining Net'o!2 on T!ade "ARTNeT#

Inte!national T!ade Reso!ces
http://comtrade.un.org/http://www.wto.org/english/res_e/statis_e/statis_e.htmhttp://www.oecd.org/statsportal/0,3352,en_2825_293564_1_1_1_1_1,00.htmlhttp://epp.eurostat.ec.europa.eu/portal/page/portal/external_trade/introductionhttp://epp.eurostat.ec.europa.eu/portal/page/portal/balance_of_payments/data/databasehttps://en.wikipedia.org/wiki/Balance_of_paymenthttp://epp.eurostat.ec.europa.eu/portal/page/portal/national_accounts/data/databasehttps://en.wikipedia.org/wiki/National_accountshttp://faostat.fao.org/site/291/default.aspxhttps://en.wikipedia.org/wiki/FAOhttp://aliceweb.desenvolvimento.gov.br/default.asphttp://www.macalester.edu/research/economics/PAGE/HAVEMAN/Trade.Resources/TradeData.htmlhttp://www.unescap.org/tid/aptiad/http://www.artnetontrade.org/http://www.cybex.in/International-Trade-Resources/Default.aspxhttp://comtrade.un.org/http://www.wto.org/english/res_e/statis_e/statis_e.htmhttp://www.oecd.org/statsportal/0,3352,en_2825_293564_1_1_1_1_1,00.htmlhttp://epp.eurostat.ec.europa.eu/portal/page/portal/external_trade/introductionhttp://epp.eurostat.ec.europa.eu/portal/page/portal/balance_of_payments/data/databasehttps://en.wikipedia.org/wiki/Balance_of_paymenthttp://epp.eurostat.ec.europa.eu/portal/page/portal/national_accounts/data/databasehttps://en.wikipedia.org/wiki/National_accountshttp://faostat.fao.org/site/291/default.aspxhttps://en.wikipedia.org/wiki/FAOhttp://aliceweb.desenvolvimento.gov.br/default.asphttp://www.macalester.edu/research/economics/PAGE/HAVEMAN/Trade.Resources/TradeData.htmlhttp://www.unescap.org/tid/aptiad/http://www.artnetontrade.org/http://www.cybex.in/International-Trade-Resources/Default.aspx


18/45

18


;o!ld Integ!ated T!ade Soltion ";ITS#

@a!2et Access @ap% an online database of cstoms ta!iffs and ma!2et

!ei!ements

Oter e5ternal links

T&e E)pected Benefits of T!ade Libe!alization fo! ;o!ld Income and

De,elopment. Opening t&e 5Blac2 Bo)5 of Global T!ade @odelingby Antoine

BoMt "3==


19/45

19


GLOBAL TRADE TRENDS

Long6te!m t!ends in ,ale and ,olme of me!c&andise e)po!ts% 0>:=63=0=

#)nde8 numbers, $%%%9%%'

Source6?NCTAD sec!eta!iat calclations% based on ;1*


20/45

20


me!c&andise t!ade in ,olme te!ms &as yet to e,en !eclaim its p!e6c!isis le,el$ By

cont!ast% t&e ,olme of bot&impo!ts ande)po!ts in most g!ops of de,eloping cont!ies

&ad al!eady e)ceeded t&ei! p!e6c!isis pea2 in t&e co!se of 3=0=% 'it& East Asia% C&ina in

pa!ticla!% leading t&e e)pansion$

Globalization feat!es t&e !ise in global e)po!ts !elati,e to global income% '&ile

indi,idal cont!ies see t&ei! !especti,e e)po!ts and impo!ts !ise as s&a!es of national

income "@otion c&a!t#$ In ot&e! 'o!ds% a !ising p!opo!tion of global p!odction of goods

and se!,ices is being t!aded ac!oss bo!de!s !at&e! t&an sold at &ome$ T&e global c!isis &as

b!og&t t&e long6!n t!end of !ising global integ!ation t&!og& t!ade to a &alt% at least

tempo!a!ily$ T&e p!e6c!isis t!end to'a!d mo!e openness and e,e!6deepe! t!ade integ!ation

mig&t 'ell fi!mly !eestablis& itself in de co!se$ Bt pe!sistence o! t!end !e,e!sal seem

also possible$ At a time of &ig& nemployment% fiscal aste!ity% and complaints of

c!!ency 'a!s% t&e t&!eat of !ising t!ade p!otectionism is looming la!ge$

T&e global c!isis and ne,en t!ade !eco,e!y &a,e !einfo!ced t&e ongoing s&ift in balance

in t&e 'o!ld economy% feat!ing t&e !elati,e decline of de,eloped cont!ies "C&a!t#$ In

3=0= t&e ,ale of total me!c&andise e)po!ts f!om all cont!ies of t&e 'o!ld 'as 0:

t!illion "in c!!ent ?nited States dolla!s#% of '&ic& t&e s&a!e of de,eloped cont!ies 'as

:9 pe!cent% do'n f!om = pe!cent in 3==:$ As t&e 'o!ldPs leading me!c&andise e)po!te!

since 3==>% C&inaPs s&a!e of 'o!ld e)po!ts climbed to 0= pe! cent in 3=0=% a&ead of t&e

?nited States "< pe! cent#% Ge!many "< pe! cent#% and Hapan ": pe! cent# "Table#$ On t&e

impo!t side% t&e !an2ing still s&o's t&e ?nited States in fi!st place "07 pe! cent#% follo'ed

by C&ina "> pe! cent#% Ge!many "F pe! cent#% and Hapan "9$: pe! cent# "Table#$
http://opendefinitions%28%27imports%27%29/http://opendefinitions%28%27exports%27%29/http://dgff.unctad.org/chapter1/1.1.html#motion-charthttp://opendefinitions%28%27imports%27%29/http://opendefinitions%28%27exports%27%29/http://dgff.unctad.org/chapter1/1.1.html#motion-chart


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21


Source6?NCTAD sec!eta!iat calclations% based on ;1*=s% &as pic2ed p some'&at% as t&ey cold !ecapt!e some of t&e lost g!ond

since t&e mid63===s$ elped by imp!o,ements in commodity p!ices% t&e e)po!t s&a!e of

t&e LDCs% t&e ma(o!ity of '&ic& a!e in sb6Sa&a!an Af!ica and commodity6dependent%

!ose f!om =$ pe!cent in 3==0 to 0$0 pe!cent in 3=0= "C&a!t#$ et commodity p!ice


22/45

22


inc!eases &a,e been a mi)ed blessing e,en to LDCs% p!o,ing &a!mfl !at&e! t&an

beneficial to some$ Especially lo'6income% food6deficit cont!ies t&at &ad sffe!ed

se,e!ely in t&e food c!isis of 3==F63==< 'e!e again affected negati,ely in 3=0=63=00$

;&ile an p'a!d t!end in 'o!ld p!ima!y commodity p!ices asse!ted itself in t&e 3===s%

!e,e!sing t&e p!io! do'n'a!d t!end t&at &ad been in place since 0>>:% t&e pe!iod

s!!onding t&e global c!isis 'itnessed commodity p!ices ta2ing a !olle!6coaste! !ide$ T&e

boom yea!s since 3==3 ended 'it& a se,e!e nosedi,e f!om t&ei! pea2 le,el of mid63==


23/45

23


H(./l(./#s

As t!ade flo's &a,e gene!ally g!o'n faste! t&an income since t&e Second ;o!ld

;a!% cont!iesP openness and t&ei! e)pos!e to e)te!nal de,elopments &a,e

inc!eased

Global t!ade collapsed in t&e global c!isis of 3==% !eco,e!y !emains

nfinis&ed and ne,en t&e global c!isis appea!s to &a,e left a ma!2ed impact on

t&e dynamism of global t!ade

T&e global c!isis &as also b!og&t t&e long6!n t!end of !ising global integ!ation

t&!og& t!ade to a &alt% at least tempo!a!ily T&e global c!isis and ne,en t!ade !eco,e!y &a,e !einfo!ced t&e ongoing s&ift in

balance in t&e 'o!ld economy% feat!ing t&e !elati,e decline of de,eloped

cont!ies

T&e s&ifting global balance is also ,isible in t&e c&anging dist!ibtion of e)po!ts

by destination% feat!ing t&e !ising impo!tance of t!ade among de,eloping

cont!ies

T&e !ise in Sot&6Sot& t!ade &as been especially p!ononced in East Asia

LDCs &a,e gene!ally pa!ticipated in t&ese t!ends to a lesse! e)tent bt !eco,e!ed

some lost g!ond in !ecent yea!s

Related to commodity p!ice de,elopments many cont!ies &a,e e)pe!ienced

sizeable te!ms6of6t!ade c&anges since 3==3% 'it& bot& 'inne!s "especially oil and

metal e)po!te!s# and lose!s "especially food6deficit cont!ies# among de,eloping

cont!ies inclding LDCs

Global go,e!nance !efo!m needs to ma2e f!t&e! p!og!ess$

E,olution o* 7orld trade and global gross domestic -roduct8 9:;9$ pe! cent% !especti,ely$ At t&e same time% C&ina+s s&a!e


24/45

24


in 'o!ld e)po!ts !egiste!ed a!ond 0 pe! cent and its s&a!e in global GD- 'as 3$9 pe!

cent$ *ifteen yea!s late!% in 0>>% C&ina dobled its e)po!ts s&a!e to 3$ pe! cent% '&e!eas

de,eloping Af!ica lost its 'o!ld e)po!ts s&a!e% '&ic& plnged f!om 9$F pe! cent to 3$7 pe!

cent$ In 3=0=% C&ina+s s&a!e in 'o!ld e)po!ts stood at >$3 pe! cent% a fe' pe!centage

points belo' t&at of t&e ?nited States ">$ pe! cent#% bt 'it& a sta!2 cont!ast in t!ade

balance$ In t&e pe!iod 0>


25/45

25


MAJOR CURRENT TRENDS IN FOREIGN TRADE

%a=or current trends in *oreign trade are as *ollo7s6

C!!ent t!ends a!e to'a!ds t&e inc!easing fo!eign t!ade and inte!dependence of fi!ms%

ma!2ets and cont!ies$

Image Co!tesy .

Intense competition among cont!ies% indst!ies% and fi!ms on a global le,el is a !ecent

de,elopment o'ed to t&e conflence of se,e!al ma(o! t!ends$ Among t&ese t!ends a!e.

1) Forced Dynamism:

Inte!national t!ade is fo!ced to sccmb to t!ends t&at s&ape t&e global political% clt!al%

and economic en,i!onment$ Inte!national t!ade is a comple) topic% becase t&e

en,i!onment it ope!ates in is constantly c&anging$ *i!st% bsinesses a!e constantly ps&ing


26/45

26


t&e f!ontie!s of economic g!o't&% tec&nology% clt!e% and politics '&ic& also c&ange t&e

s!!onding global society and global economic conte)t$ Secondly% facto!s e)te!nal to

inte!national t!ade "e$g$% de,elopments in science and info!mation tec&nology# a!e

constantly fo!cing inte!national t!ade to c&ange &o' t&ey ope!ate$

) Cooperation amon! Countries:

Cont!ies coope!ate 'it& eac& ot&e! in t&osands of 'ays t&!og& inte!national

o!ganisations% t!eaties% and consltations$ Sc& coope!ation gene!ally enco!ages t&e

globalization of bsiness by eliminating !est!ictions on it and by otlining f!ame'o!2s

t&at !edce nce!tainties abot '&at companies 'ill and 'ill not be allo'ed to do$

Cont!ies coope!ate.

i# To gain !ecip!ocal ad,antages%

ii# To attac2 p!oblems t&ey cannot sol,e alone% and

iii# To deal 'it& conce!ns t&at lie otside anyonePs te!!ito!y$

Ag!eements on a ,a!iety of comme!cially !elated acti,ities% sc& as t!anspo!tation and

t!ade% allo' nations to gain !ecip!ocal ad,antages$ *o! e)ample% g!ops of cont!ies &a,e

ag!eed to allo' fo!eign ai!lines to land in and fly o,e! t&ei! te!!ito!ies% sc& as CanadaPs

and RssiaPs ag!eements commencing in 3==0 to allo' pola! o,e! flig&ts t&at 'ill sa,e

fi,e &o!s bet'een Ne' o!2 and ong ong$

G!ops of cont!ies &a,e also ag!eed to p!otect t&e p!ope!ty of fo!eign6o'ned

companies and to pe!mit fo!eign6made goods and se!,ices to ente! t&ei! te!!ito!ies 'it&

fe'e! !est!ictions$ In addition% cont!ies coope!ate on p!oblems t&ey cannot sol,e alone%

sc& as by coo!dinating national economic p!og!ams "inclding inte!est !ates# so t&at


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global economic conditions a!e minimally dis!pted% and by !est!icting impo!ts of ce!tain

p!odcts to p!otect endange!ed species$

*inally% cont!ies set ag!eements on &o' to comme!cially e)ploit a!eas otside any of

t&ei! te!!ito!ies$ T&ese inclde ote! space "sc& as on t&e t!ansmission of tele,ision

p!og!ams#% non6coastal a!eas of oceans and seas "sc& as on e)ploitation of mine!als#%

and Anta!ctica "fo! e)ample% limits on fis&ing 'it&in its coastal 'ate!s#$

") #iberali$ation of Cross-border %o&ements:

E,e!y cont!y !est!icts t&e mo,ement ac!oss its bo!de!s of goods and se!,ices as 'ell as

of t&e !eso!ces% sc& as 'o!2e!s and capital% to p!odce t&em$ Sc& !est!ictions ma2e

inte!national t!ade cmbe!some f!t&e!% becase t&e !est!ictions may c&ange at any time%

t&e ability to sstain inte!national t!ade is al'ays nce!tain$ o'e,e!% go,e!nments today

impose fe'e! !est!ictions on c!oss6bo!de! mo,ements t&an t&ey did a decade o! t'o ago%

allo'ing companies to bette! ta2e ad,antage of inte!national oppo!tnities$ Go,e!nments

&a,e dec!eased !est!ictions becase t&ey belie,e t&at.

i# So6called open economies "&a,ing ,e!y fe' inte!national !est!ictions# 'ill gi,e

consme!s bette! access to a g!eate! ,a!iety of goods and se!,ices at lo'e! p!ices%

ii# -!odce!s 'ill become mo!e efficient by competing against fo!eign companies% and

iii# If t&ey !edce t&ei! o'n !est!ictions% ot&e! cont!ies 'ill do t&e same$

') (ransfer of (echnolo!y:

Tec&nology t!ansfe! is t&e p!ocess by '&ic& comme!cial tec&nology is disseminated$ T&is

'ill ta2e t&e fo!m of a tec&nology t!ansfe! t!ansaction% '&ic& may o! may not be a legally


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binding cont!act% bt '&ic& 'ill in,ol,e t&e commnication% by t&e t!ansfe!o!% of t&e

!ele,ant 2no'ledge to t&e !ecipient$ It also incldes non6comme!cial tec&nology

t!ansfe!s% sc& as t&ose fond in inte!national coope!ation ag!eements bet'een de,eloped

and de,eloping states$ Sc& ag!eements may !elate to inf!ast!ct!e o! ag!iclt!al

de,elopment% o! to inte!national coope!ation in t&e fields of !esea!c&% edcation%

employment o! t!anspo!t$

) *ro+th in ,mer!in! %arets:

T&e g!o't& of eme!ging ma!2ets "e$g$% India% C&ina% B!azil% and ot&e! pa!ts of Asia and

Sot& Ame!ica especially# &as impacted inte!national t!ade in e,e!y 'ay$ T&e eme!ging

ma!2ets &a,e simltaneosly inc!eased t&e potential size and 'o!t& of c!!ent ma(o!

inte!national t!ade '&ile also facilitating t&e eme!gence of a '&ole ne' gene!ation of

inno,ati,e companies$ Acco!ding to QA special !epo!t on inno,ation in eme!ging

ma!2ets by T&e Economist magazine% QT&e eme!ging 'o!ld% long a so!ce of c&eap la%

no' !i,als t&e !ic& cont!ies fo! bsiness inno,ation$

INTERNATIONAL TRADE AND INVESTMENT

TRENDS

It is a p!i,ilege and pleas!e fo! me to pa!ticipate in t&is *i!st Annal Ast!alian

Confe!ence on Inte!national T!ade% Edcation and Resea!c&$ T&e topic gi,en to me 66

inte!national t!ade and in,estment t!ends 66 is pa!ticla!ly topical% gi,en ne)t 'ee2+s

;TO @iniste!ial Confe!ence in Singapo!e$ ;&ile t&e Singapo!e meeting focses% of

co!se% on t!ade% t&e estion of '&et&e! o! not in,estment og&t to be pt on t&e agenda

is one of t&e isses on '&ic& t&e p!epa!ato!y p!ocess cold not !eac& consenss$

In t&e lig&t of t&is% my p!esentation 'ill not deal 'it& t!ade per seand in,estmentper se

"alt&og& I 'ill gi,e some attention to in,estment t!ends#% bt !at&e! on t&e inte!action


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bet'een in,estment and t!ade and t&e inte!national policy f!ame'o!2 in t&is a!ea$ In so

doing% I can d!a' on t&e ;o!ld In,estment Repo!t 0>>% '&ose sbtitle 66 and% &ence%

focs 66 is 5In,estment% T!ade and Inte!national -olicy A!!angements5$

;e all 2no' abot t&e impo!tance of t!ade as an engine of g!o't& and a mec&anism to

lin2 ma!2ets inte!nationally$ I need not elabo!ate on t&is sb(ect as @!$ Bo!a 'ill spea2% in

t&e ne)t p!esentation% abot c&anging patte!ns of global t!ade$ Sffice it to say t&at t!ade

&as g!o'n !apidly% &elped by t&e libe!alizing f!ame'o!2 of% fi!st% GATT and% no'% t&e

;TO$ T&e ,olme of 'o!ld t!ade is no' some : t!illion$

*o!eign di!ect in,estment "*DI#% too% &as g!o'n !apidly% mo!e !apidly indeed t&an t!ade

and domestic p!odction$ In t&e ea!ly 0>>:% *DI flo's to de,eloping cont!ies alone amonted to 0== billion% 'it&

'o!ld flo's !eac&ing 70: billion$

T&ese fig!es mas2% of co!se% a nmbe! of impo!tant c&a!acte!istics$ Let me b!iefly loo2

at t&em% fi!st f!om a &ome cont!y and t&en f!om a &ost cont!y pe!specti,e$

0$ T&e!e &as been a conside!able di,e!sification of &ome cont!ies$ If% in t&e past% t&e

?$S$ and t&e ?$$ &ad been t&e dominant &ome cont!ies% today all de,eloped cont!ies

&a,e a significant nmbe! of fi!ms t&at in,est ab!oad$ ;&at is mo!e% fi!ms f!omde,eloping cont!ies a!e inc!easingly becoming ot'a!d in,esto!s% acconting fo! 0:J

of 'o!ld otflo's in 0>>:$ @ost of t&ese otflo's ta2e place in a !egional conte)t% and

t&e!e t&ey can be ite impo!tant$ In Asia% some 9=J of t&e *DI inflo's into t&e

de,eloping cont!ies of t&e !egion o!iginate in ot&e! de,eloping cont!ies in t&e !egion$


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As a !eslt% ente!p!ises f!om Asian de,eloping cont!ies &a,e become t&e single most

impo!tant in,esto!s in Asia% a&ead of fi!ms f!om Hapan% t&e ?$S$ and E!ope$

As fa! as E!opean fi!ms a!e conce!ned% one can e,en say t&at t&ey neglected Asia$

Today% only some 7J of t&e total *DI stoc2 and flo's of t&e E? a!e di!ected to'a!ds

de,eloping Asia$ As it &appens% t&is fig!e is ite simila! '&en it comes to Asian

de,eloping cont!ies+ *DI in E!ope% '&ic& acconts fo! abot 9J of de,eloping Asia+s

*DI$ In ot&e! 'o!ds% neit&e! E!ope no! de,eloping Asia &a,e di!ected t&ei! ot'a!d *DI

significantly to eac& ot&e!$ Bt '&ile E!ope+s lo' s&a!e in Asia a!gably !eflects a

neglect by E!opean fi!ms of a !egion t&at people ag!ee is t&e most dynamic in t&e 'o!ld

today% Asia+s lo' s&a!e in E!ope% most people 'old also ag!ee% simply !eflects t&e fact

t&at Asian fi!ms a!e only (st beginning to bild p t&ei! ot'a!d in,estment stoc2s$

3$ Loo2ing at *DI flo's f!om t&e &ost cont!y side% one finds t&at t&e de,eloped

cont!ies contine to dominate t&e pict!e$ Bt% again% t&e mo!e inte!esting aspect is t&at

t&e s&a!e of t&e de,eloping cont!ies &as inc!eased% !eac&ing some 7=J of 'o!ld inflo's

in 0>>:$ ;it&in t&e de,eloping 'o!ld% Asia &as att!acted t&e lion+s s&a!e% some t'o6t&i!ds

of t&e 0== billion t&at 'ent to de,eloping cont!ies in 0>>:% to be p!ecise$ ;it&in Asia%C&ina &as been t&e sta! pe!fo!me! "alt&og& 0>> may 'ell see a bit of a decline in *DI

inflo's#% follo'ed by t&e ASEAN cont!ies$

T&e dominance of C&ina also d!a's attention to anot&e! c&a!acte!istic of *DI flo's%

namely t&at t&ey a!e &ig&ly concent!ated$ To be mo!e specific% t&e la!gest ten &ost

cont!ies !ecei,e abot t'o6t&i!ds of *DI inflo's% '&ile t&e smallest 0== !ecipients

!ecei,e only 0J$


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Ast!alia% incidentally% &ad a,e!age annal *DI inflo's of abot 9 billion bet'een 0>>06

0>>9% an amont t&at mo!e t&an t!ipled to 07 billion in 0>>:$ T&is compa!es to otflo's

of abot : billion in t&e same yea!$

T&e!e is one mo!e t&ing t&at I 'old li2e to mention% namely t&at a good pa!t of *DI

consists of 5seential5 and 5associated5 *DI$ 5Seential5 *DI is nde!ta2en by fo!eign

affiliates t&at a!e al!eady establis&ed% and consists mostly of !ein,ested ea!nings$

5Associated5 *DI is *DI t&at is t!igge!ed by t&e establis&ment o! e)pansion of e)isting

fo!eign affiliates it is typically nde!ta2en by spplie!s o! by !i,al fi!ms t&at follo' a

leade! into fo!eign ma!2ets$ A good pa!t of *DI in t&e se!,ices secto! also falls into t&is

catego!y$ Se!,ices *DI% incidentally% no' acconts fo! abot :=6=J of *DI flo's$

As a !eslt of t&e !apid g!o't& of *DI flo's% t&e 'o!ld stoc2 of *DI is no' nea!ly 7

t!illion% o'ned by some 9=%=== t!ansnational co!po!ations "TNCs# t&!og& mo!e t&an

3F=%=== fo!eign affiliates "not conting nme!os non6eity fo!ms of cont!olling assets

ab!oad% inclding t&!og& st!ategic alliances#$ T&is stoc2 of 7 t!illion gi,es !ise to some

t!illion of sales by fo!eign affiliates$

;&at does t&is all add p to

I &ad made !efe!ence ea!lie! to t!ade as an engine of g!o't& and a mec&anism to lin2

ma!2ets inte!nationally$ I mentioned also t&at 'o!ld e)po!ts a!e no' 'o!t& abot :

t!illion$

If t&is : t!illion of e)po!ts is compa!ed 'it& t&e t!illion of sales by fo!eign affiliates%

it becomes ob,ios t&at *DI &as become mo!e impo!tant t&an t!ade in te!ms of deli,e!ing


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goods and se!,ices to fo!eign ma!2ets and% t&e!eby% lin2ing ma!2ets inte!nationally$ In t&e

case of t&e ?$S$% in fact% t&!ee6a!te!s of all goods and se!,ices deli,e!ed to fo!eign

ma!2ets a!e actally deli,e!ed by fo!eign affiliates$ T&is is a sitation t&at is st!i2ingly

diffe!ent f!om t&at '&ic& p!e,ailed immediately afte! ;o!ld ;a! II% '&en t!ade alone

!eigned sp!eme '&en it came to inte!national economic t!ansactions$

Bt *DI is not only a mec&anism to lin2 ma!2ets% it is also a mec&anism to lin2 t&e

p!odction systems of cont!ies inte!nationally$ In t&e past% t&is lin2ing of p!odction

systems 'as not ,e!y p!ononced% as most TNCs p!sed stand6alone st!ategies% in t&e

f!ame'o!2 of '&ic& fo!eign affiliates 'e!e la!gely atonomos nits% only loosely

integ!ated into t&ei! o,e!all co!po!ate net'o!2s$ Today% &o'e,e!% an inc!easing nmbe! of

TNCs is p!sing comple) integ!ation st!ategies t&at a!e c&a!acte!ized by a ,e!tical and

inc!easingly &o!izontal inte!national int!a6fi!m di,ision of labo! in '&ic& any pa!t of t&e

,ale6added c&ain can be located ab!oad '&ile !emaining flly integ!ated in t&e co!po!ate

net'o!2 as a '&ole$ Comple) co!po!ate integ!ation st!ategies see2 to e)ploit !egional o!

global economies of scale and a &ig&e! deg!ee of fnctional specialization$ T&e !eslts a!einteg!ated inte!national p!odction net'o!2s at t&e fi!m le,el$ T&e agg!egation of t&ese

p!odction net'o!2s% in t!n% leads to t&e eme!gence of an integ!ated inte!national

p!odction system 66 t&e p!odcti,e co!e of t&e globalizing 'o!ld economy$

T&is lin2ing of t&e p!odcti,e systems of cont!ies !ep!esents deepe! integ!ation t&an t&at

ac&ie,ed by t!ade$ ?nli2e t!ade 66 '&ic& no!mally in,ol,es one6off t!ansactions of goods

and se!,ices 66 *DI% by its ,e!y definition% in,ol,es t&e establis&ment of lasting

!elations&ips t&at engage t&e facto!s of p!odction of t&e cont!ies in,ol,ed$ At t&e same

time% t&e co!po!ate net'o!2s t&at a!e being establis&ed in t&e p!ocess can se!,e as

condits bet'een cont!ies 66 not only fo! capital% bt also fo! tec&nology% 2no'6&o' and

s2ills% as 'ell as fo! impo!ts and e)po!ts$ T&is nde!lines t&at *DI is actally a pac2age

of tangible and intangible !eso!ces% all of '&ic& can ma2e *DI an engine of g!o't&$


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T&e !efe!ence I (st made to TNC net'o!2s being condits fo! impo!ts and e)po!ts b!ings

me to t&e inte!!elations&ips bet'een *DI and t!ade$ At t&e agg!egate le,el% 'e estimate

t&at abot one6t&i!d of 'o!ld t!ade is int!a6fi!m t!ade "i$e$% ta2es place inte!nationally

'it&in t&e same co!po!ate net'o!2s#% and t&at anot&e! one6t&i!d of 'o!ld t!ade is

nde!ta2en by TNCs$ T&ese fig!es s&o' &o' closely *DI and t!ade a!e% indeed%

inte!!elated 66 an inte!!elatedness t&at 'e can e)pect to inc!ease f!t&e! 'it& t&e g!o'ing

inte!national integ!ation of co!po!ate p!odction net'o!2s$

T&is !aises an impo!tant estion% namely. &o' a!e *DI and t!ade inte!!elated O!% to pt

it diffe!ently% does t!ade lead to *DI O! does *DI lead to t!ade

In t!ying to nde!stand t&e inte!lin2ages bet'een *DI and t!ade% it is sefl to begin by

noting t&at% &isto!ically% t&e inte!nationalization p!ocess fo! a p!odct "and% often% fo! a

fi!m# &as been c&a!acte!ized by a seential mo,ement !nning f!om t!ade to *DI o!

f!om *DI to t!ade$ In t&e case of ma!2et6see2ing manfact!ing fi!ms% t&e seence

typically !ns f!om domestic p!odction in t&e cont!y of o!igin% to e)po!ts% often

follo'ed by licensing o! ot&e! cont!actal a!!angements% and finally% *DI$ On t&e ot&e!

&and% in t&e case of manfact!ing fi!ms see2ing lo' cost inpts% t&e p!ocess cold begin

'it& *DI% follo'ed by e)po!ts f!om t&e &ost cont!y$ T&is latte! seence is also%

ob,iosly% t&e one t&at c&a!acte!izes t&e p!ocess in many nat!al !eso!ces$ In se!,ices% of

co!se% t!ade "as t!aditionally nde!stood# is not an option 66 o! at least it 'as not% ntil

!ecently 66 and fi!ms mst engage in fo!eign p!odction if t&ey 'ant to e)pand into

inte!national ma!2ets. t&e linea! seence of mo,ing comfo!tably f!om e)po!ting to *DI

gets t!ncated se!,ices fi!ms t&at &a,e bilt p competiti,e ad,antages gene!ally &a,e to

in,est ab!oad in o!de! to e)ploit t&ese in fo!eign ma!2ets$ As se!,ices% especially in

info!mation6intensi,e indst!ies% become t!anspo!table de to ad,ances in

telecommnications and info!mation tec&nologies% t&is sitation may c&ange$


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T&e !ele,ance of t&e t!aditional seence of inte!nationalization t&at I &a,e (st

mentioned fo! t&e inte!!elations&ip bet'een *DI and t!ade is t&at% to some e)tent% t&e

seence as it occ!!ed in many manfact!ing p!odcts is pa!tly !esponsible fo! t&e

notion t&at *DI and t!ade a!e sbstittes$ et% if one loo2s at t&e p!ocess all t&e 'ay% it

becomes clea! t&at% by and la!ge% *DI and t!ade a!e complementa!y o! mtally

sppo!ti,e. if one conside!s t&e !elations&ip at t&e le,el of a single p!odct o! a single6

p!odct fi!m% t&e only sitation in '&ic& *DI sbstittes fo! t!ade is t&at of a ma!2et6

see2ing manfact!ing in,estment t&at mig&t !eplace e)po!ts of a gi,en p!odct o! fi!m$

In all ot&e! cases% *DI is eit&e! t!ade6c!eating o!% as in t&e case of se!,ices% net!al$ Once

'e mo,e to conside! t&e effects at an indst!y o! cont!y le,el% of co!se% t&e !elations&ip

becomes mc& mo!e complicated% becase of associated o! seconda!y effects ope!ating

t&!og& e)po!ts of inte!mediate p!odcts% mac&ine!y o! se!,ices by pa!ent fi!ms o! ot&e!

fi!ms in a &ome cont!y to fo!eign affiliates% !ega!dless of secto!% o! t&!og& associated

*DI t&at often follo's '&en in,estment in a pa!ticla! p!odct 66 '&et&e! a good o!

se!,ice 66 &as been made$ *!om '&at 'e 2no' on t&e basis of empi!ical stdies% it seems

t&at t&e o,e!all impact of t&e ,a!ios di!ect and indi!ect effects t&at occ!% !ega!dless of

t&e initial seence% is t&at *DI is nli2ely to be t!ade6!eplacing% eit&e! fo! t&e &ome o!

t&e &ost cont!y% e)cept of co!se% '&e!e policies a!e implemented 'it& t&e specific idea

of !eplacing t!ade by *DI o! *DI by t!ade$

T&e e)pansion of *DI and t!ade t&e!efo!e c!eates% at least globally% a 'in6'in sitation$ In

t&e best case% t&is e)pansion lin2s t&e t!ade engine of g!o't& 'it& t&e in,estment engine

of g!o't&$

T&e comple)ity of t&e inte!!elations&ip bet'een *DI and t!ade is inc!easing significantly

as a !eslt of c&anges in t&e economic en,i!onment fo! inte!national t!ansactions t&at

&a,e ta2en place in !ecent decades 66 in pa!ticla!% t&e !edction of tec&nological and

policy6!elated ba!!ie!s to t&e mo,ement of goods% se!,ices% capital% p!ofessional and


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s2illed 'o!2e!s and fi!ms$ One !eslt &as been t&at inte!national p!odction &as g!o'n

significantly and t&e nmbe! of TNC pa!ent6fi!ms and fo!eign affiliates &as inc!eased

sbstantially$ T&is% copled 'it& a mc& mo!e enabling en,i!onment bot& tec&nologically

and policy6'ise% &as meant t&at fi!ms a!e mc& f!ee! to c&oose &o' to se!,e ma!2ets o!

&o' to obtain fo!eign !eso!ces$ T&ey can% mo!eo,e!% sta!t t&e inte!nationalization

seence fo! a ne' p!odct any'&e!e 'it&in t&ei! TNC systems% and s2ip o,e! steps in

t&e p!ocess$ All of t&is gi,es fi!ms mc& g!eate! lee'ay to ta2e a !egional o! global ,ie'

of ma!2ets and to se!,e t&em in t&e most efficient 'ay possible% combining *DI and

t!ade$

T&e decision to locate any pa!t of t&e ,ale6added c&ain '&e!e,e! it is best fo! a fi!m 66

be it t!ansnational o! national 66 to con,e!t global inpts into otpts fo! global ma!2ets

means t&at *DI and t!ade flo's a!e dete!mined simltaneosly$ T&ey a!e bot& immediate

conseences of t&e same locational decision$ T&e estion t&e!efo!e becomes mo!e and

mo!e% no longe! '&et&e! t!ade leads to *DI o! *DI leads to t!ade '&et&e! *DI sbstittes

fo! t!ade o! t!ade sbstittes fo! *DI o! '&et&e! t&ey complement eac& ot&e!$ Rat&e!% it

becomes. &o' do fi!ms access !eso!ces 66 '&e!e,e! t&ey a!e located 66 in t&e inte!est of

o!ganizing p!odction as p!ofitably as possible fo! t&e national% !egional o! global

ma!2ets t&ey 'is& to se!,e In t&ese ci!cmstances% t&e decision '&e!e to locate is a

decision '&e!e to in,est and f!om '&e!e to t!ade$ And it becomes a *DI decision% if a

fo!eign location is c&osen$ It follo's t&at% inc!easingly% '&at matte!s a!e t&e facto!s t&at

ma2e pa!ticla! locations ad,antageos fo! pa!ticla! acti,ities% fo! bot&% domestic and

fo!eign in,esto!s$

T&is inc!easingly simltaneos dete!mination of *DI and t!ade flo's and t&e !ole of t!ade

and *DI in de,elopment &a,e p!ofond policy implications$ To begin 'it&% fo!

go,e!nments t&is means t&at% inc!easingly% t&ey &a,e to ma2e s!e t&at t&ei! policies

to'a!ds *DI and t!ade a!e in &a!mony 'it& eac& ot&e! if t&ey 'is& to ta2e ad,antage of


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t&e inte!!elations&ips bet'een *DI and t!ade$ B!oade!% t&e distinction bet'een domestic

in,estment and fo!eign in,estment becomes mo!e and mo!e bl!!ed$ @o!e specifically%

go,e!nments need to ma2e it not only att!acti,e fo! fo!eign in,esto!s to come to t&ei!

s&o!es t&ey inc!easingly need to ma2e it also att!acti,e fo! domestic in,esto!s to stay on6

s&o!e% if t&ey 'is& to fel economic g!o't&$

In b!ief% go,e!nments &a,e to c!eate an en,i!onment in '&ic& in,estment 66 be it

domestic o! fo!eign 66 can p!ospe!$ ;&at is mo!e% t&ey &a,e to do t&is nde! conditions in

'&ic& all go,e!nments a!e competing 66 and a!e competing fie!cely 66 to do t&e same%

namely to entice t&ei! o'n fi!ms as 'ell as fo!eign fi!ms to locate p!odction facilities on

t&ei! te!!ito!ies$

-a!t of t&is competition ta2es t&e fo!m of policy competition and is aimed at establis&ing

t&e best enabling f!ame'o!2 fo! in,estment$ -olicy competition ta2es place at se,e!al

le,els.

6 *i!st and fo!emost at t&e national le,el$ To illst!ate% in 0>>: alone% 0=

ot of 003 !eglato!y c&anges in t&e *DI !egimes of 9 cont!ies 'ent in

t&e di!ection of g!eate! libe!alization o! p!omotion$ If one ta2es t&e pe!iod

0>>060>>: as a '&ole% only 00 ot of 9


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in,estment t!eaties$ As of Hne 0>>% t&e!e 'e!e 0%0= BITs in e)istence%

t'o6t&i!ds of t&em conclded d!ing t&e 0>>=s$ Some 0:< cont!ies

pa!ticipate in t&em% inclding% inc!easingly% de,eloping cont!ies

conclding sc& t!eaties 'it& ot&e! de,eloping cont!ies$

6 At t&e !egional le,el% too% go,e!nments see2 to imp!o,e t&e f!ame'o!2 fo!

in,estment flo's% especially in t&e conte)t of t&e E?% NA*TA% t&e Lom

Con,ention% A-EC and @e!cos!$ In fact% t&ese ag!eements a!e no longe!

only f!ee t!ade ag!eements bt mo!e and mo!e f!ee in,estment ag!eements

as 'ell$

6 At t&e mltilate!al le,el% finally% t&e OECD &as emba!2ed on negotiations

on a @ltilate!al Ag!eement on In,estment$ In addition% a nmbe! of

isse6specific a!!angements e)ist% inclding as !ega!ds se!,ices%

pe!fo!mance !ei!ements% intellectal p!ope!ty !ig&ts% ins!ance%

settlement of disptes and employment and labo! !elations$ Attention is

also being paid to !est!icti,e bsiness p!actices% incenti,es and consme!

p!otection$

E)pe!ience 'it& past effo!ts sggests t&at t&e e,oltion of inte!nationala!!angements fo! *DI &as follo'ed and inte!acted 'it& de,elopments at t&e

national le,el and !eflects t&e p!io!ities and conce!ns of a pa!ticla! pe!iod$

-!og!ess in t&e de,elopment of inte!national in,estment !les is lin2ed to t&e

con,e!gence of !les adopted by indi,idal cont!ies$ *!t&e!mo!e% an app!oac&

to *DI isses t&at ta2es into accont t&e inte!ests of all pa!ties is mo!e li2ely to

gain 'idesp!ead acceptance and% ltimately% to be mo!e effecti,e$ T&is !aises t&e

estion of &o' an app!op!iate balance of !ig&ts and obligations among t&e acto!s

affected can be fond$

;idesp!ead !ecognition is eme!ging at t&e p!esent time on t&e p!incipal isses t&at

need to be add!essed by inte!national discssions on *DI% inclding gene!al

standa!ds of t!eatment of fo!eign in,esto!s in !elation to ent!y and establis&ment


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and ope!ational conditions p!otection standa!ds% inclding dispte settlement

isses !elating to co!po!ate be&a,io! and ot&e! isses% sc& as t&e p!omotion of

*DI$ T&s% t&e!e seems to be some consenss t&at g!eate! inte!national

coope!ation on *DI isses is desi!able$

Bt t&e!e a!e ite 2eenly6felt diffe!ences bet'een go,e!nments abot &o' to p!oceed in

t&e immediate ft!e$ Some fa,o! allo'ing c!!ent a!!angements 66 '&ic&% afte! all% a!e

'o!2ing ite 'ell in p!o,iding an enabling f!ame'o!2 fo! *DI to e)pand and cont!ibte

to g!o't& and de,elopment 66 to e,ol,e o!ganically% '&ile imp!o,ing t&em by deepening

and e)panding t&em$ Ot&e!s fa,o! an app!oac& t&at in,ol,es t&e const!ction% t&!og&

negotiation% of a comp!e&ensi,e mltilate!al f!ame'o!2 fo! *DI% t&e !ationale being t&at

t&e globalization of bsiness% inc!eased ,olmes and t&e g!o'ing impo!tance of *DI% and

t&e inte!t'ined nat!e of *DI and t!ade !ei!e a global policy f!ame'o!2$

T&ese diffe!ences in app!oac& pa!tly &inge on t&e estion of '&at conseences a

mltilate!al f!ame'o!2 'old &a,e% especially as !ega!ds in,estment flo's and t&ei!

impact on de,elopment$ @any de,eloping cont!ies% in pa!ticla!% loo2 at t&is isse f!om

t&e pe!specti,e of t&e implications of a mltilate!al f!ame'o!2 fo! national de,elopment$

a,ing said t&is% it is clea! t&at most effo!ts at t&e national and inte!national le,els in t&e

a!ea of in,estment &a,e one t&ing in common. t&ey see2 to facilitate c!oss6bo!de!

in,estment% 'it& a ,ie' to'a!ds att!acting *DI% and in !ecognition t&at sc& in,estment

&as an impo!tant !ole to play in t&e de,elopment of cont!ies$ T&is is not to say t&at

de,elopment is not possible 'it&ot *DI% o! t&at *DI cannot &a,e a negati,e impact in

indi,idal cont!ies% e$g$% '&e!e competition is stifled% ce!tain !est!icti,e bsiness

p!actices a!e employed o! t!ansfe! p!ices a!e maniplated$ As al'ays% go,e!nments need

to play a p!o6acti,e !ole in o!de! to inc!ease t&e cont!ibtion t&at *DI can ma2e to

de,elopment$ T&is !ole% &o'e,e!% needs to be ca!eflly calib!ated% and fo!mlated in fll

a'a!eness of t&e const!aints 66 and oppo!tnities 66 c!eated by a libe!alizing and


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globalizing 'o!ld economy$ As t&e specific config!ation of t&ese const!aints and

oppo!tnities ,a!ies f!om cont!y to cont!y% it is a t!e c&allenge fo! policy ma2e!s to

find t&e p!ope! policy mi) t&at ma2es t&ei! cont!ies att!acti,e fo! domestic and fo!eign

in,esto!s and t&at lets t&ei! cont!ies benefit as mc& as possible f!om t&e in,estments of

t&ese in,esto!s$


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TRENDS IN GLOBAL TRADE FOR 2015

Trends in &lobal Trade *or

@obile e6comme!ce and payment soltions &a,e been in t&e t!og& of disillsionmentfo!

a'&ile no'% at least 'it&in t&e conte)t of tec&nology &ype$ o'e,e!% in t&e abo,e

infog!ap&ic '&ic& co,e!s global t!ade t!ends going into 3=0:% it is becoming clea! t&at

sc& soltions a!e finally coming into t&ei! o'n$

C!!ently mobile comme!ce sales a!e 'o!t& 077 billion% bt by 3=0< t&is 'ill ad!ple

to 3 billion$ Only 79J of consme!s &a,e bog&t online t&!og& t&ei! sma!tp&one%

and t&is is poised to contine to inc!ease significantly$
http://www.visualcapitalist.com/technology-hype-cycles/http://www.visualcapitalist.com/technology-hype-cycles/


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-!e,iosly t&is yea!% 'e tal2ed abot t&e potential of bitcoin and ot&e! c!yptoc!!encies

to dis!pt t&e payment space$ QBitcoin is t&e opposite of -ay-al% in t&e sense t&at it

actally scceeded in c!eating a c!!ency says -ete! T&iel% t&e establis&ed ,ent!e

capitalist and a p!e,ios fonde! of -aypal$ o'e,e!% 'it& t&e int!odction of Apple -ay

and ongoing de,elopment of C!!entC%t&e landscape loo2s mo!e competiti,e t&an e,e!$

;TO cts 'o!ld t!ade g!o't& fo!ecasts fo! 3=0: and 3=0

Global goods t!ade 'ill g!o' by 7$7 pe!cent t&is yea! and by 9$= pe!cent in 3=0% less

t&an p!e,iosly fo!ecast% mainly de to slggis& economic g!o't&% t&e ;o!ld T!ade

O!ganization said on Tesday$

5;e e)pect t!ade to contine its slo' !eco,e!y bt 'it& economic g!o't& still f!agile and

contined geopolitical tensions% t&is t!end cold easily be nde!mined%5 ;TO Di!ecto!6

Gene!al Robe!to Aze,edo said$

T&e ;TO fig!es a!e based on economic g!o't& estimates f!om o!ganisations inclding

t&e Inte!national @oneta!y *nd% '&ic& 'ill pdate its fo!ecasts late! on Tesday$

;TO c&ief economist Robe!t oopman said &e &ad seen t&e ne' I@* fig!es and t&ey

'old be 5in t&e same ballpa!25 and not affect t&e ;TO+s fo!ecast$

Alt&og& t&e fo!ecasts do sggest some modest g!o't& in 'o!ld goods t!ade% t&ey follo'

!epeated do'n'a!d !e,isions of t!ade fo!ecasts as t&e economic otloo2 'o!sened$

T!ade g!e' by 3$< pe!cent in 3=09% fa! less t&an an o!iginal fo!ecast of 9$F pe!cent and

also belo' t&e !e,ised fo!ecast of 7$0 pe!cent t&at t&e ;TO p!edicted last Septembe!$
http://www.visualcapitalist.com/how-bitcoin-can-and-will-disrupt-financial-system/http://qz.com/284068/the-complete-guide-to-apple-pay/http://techcrunch.com/2014/10/25/currentc/http://www.visualcapitalist.com/how-bitcoin-can-and-will-disrupt-financial-system/http://qz.com/284068/the-complete-guide-to-apple-pay/http://techcrunch.com/2014/10/25/currentc/


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T&e ne' e)pectation of 7$7 pe!cent g!o't& t&is yea! 6 al!eady !e,ised do'n t'ice% f!om

:$7 pe!cent and t&en 9$= pe!cent% is a small accele!ation bt fa! belo' t&e long te!m t!end$

G!o't& a,e!aged 3$9 pe!cent o,e! eac& of t&e last t&!ee yea!s% compa!ed 'it& an annal

a,e!age of $= pe!cent bet'een 0>>= and t&e global financial c!isis t&at began in 3==F6

3==


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CONCLUSION

T$%de %d (es#'e# %$e e d$(e$s o o$ld .$o#/ I# (ll e('"o$#%# #o %o(d %(os s&/ %s (&$e%sed "$o#e(o(s' #/%# '(./#

#/$e%#e #$e #$%de %d (es#'e# %d #o e&o$%.e deelo"'e#s

s&/ %s #/e &o&ls(o o #/e !!A #/%# &old oos# #/e'

O,e! time t&e!e a!e li2ely to be significant c&anges to t&e dist!ibtion of global 'ealt&%

g!o't& and t!ade$ Eme!ging ma!2ets% especially C&ina and India% bt also many ot&e!

eme!ging and de,eloping cont!ies 'ill cont!ibte a fa! g!eate! s&a!e of global t!ade and

'ealt&$ *i!ms 'ill need to ad(st to t&ese s&ifts% bt t&ey s&old not abandon t!aditional

ma!2ets and acti,ities in t&e p!ocess$ De,eloped cont!ies 'ill !emain la!ge and

impo!tant cstome!s$

Alt&og& t&e li2ely s&ifts 'ill pose c&allenges to de,eloped cont!ies% t&e faste! global

g!o't& t&at 'ill !eslt 'ill also gene!ate oppo!tnities$ Globalisation and especially t&e

contined f!agmentation of p!odction 'ill inc!ease t&e inte!connectedness of t&e global

economy$ T&is 'ill &a,e many benefits% bt may also inc!ease t&e dis!ption t&at s&oc2scan case and 'ill ma2e it &a!de! to inte!p!et and e)plain t&e comple)ities of

inte!national t!ade and in,estment


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ILIOGRA:HY

Hones% Ronald ;$ "0>0#$ 5Compa!ati,e Ad,antage and t&e T&eo!y of Ta!iffs5$

T&e Re,ie' of Economic Stdies :9#$ 5Specialization and Efficiency in ;o!ld

-!odction5$ T&e Re,ie' of Economic Stdies Hly 3=00#$ Compa!ing E!opean ;o!2e!s. -olicies and

Instittions$ Eme!ald G!op -blis&ing$ pp$ 370$ ISBN>F:$

E!!eyge!s% Gido @ie2e 8e!mei!e "> Decembe! 3=03#$ @ac!oeconomics and

Beyond. Essays in ono! of ;im @eesen$@a2l$ pp$ 0:$ ISBN>F=69906

3


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