B. Trends In International Trade - World Trade Organization
world trade report 2013B. Trends in internationaltradeA comprehensive and fruitful analysis of the shaping factorsof international trade and their implications for trade policycannot be performed without having a clear idea of theevolution of trade patterns over time. This part of the Reportanalyses past, present and future trends in international tradeand economic activity. It begins with a historical analysis oftrade developments from pre-industrial times to the present,focusing on the key role that technology and institutions haveplayed in the past. It then identifies and explains importanttrends in international trade that have emerged over the last30 years. In doing so, the section describes who the mainplayers are in international trade (in terms of countries orcompanies), what countries trade and with whom, and howthe nature of trade has changed over time. Finally, it providessome illustrative simulations of possible future trade scenarios.44
II – Factors shaping the future of world tradeContents1 The evolution of international trade: insights from economic history462 How has trade changed in the last 20-30 years?553 Future economic and trade scenarios89103109II B. Trends ininternational trade4 ConclusionsAppendix tablesSome key facts and findings Dramatic decreases in transport and communication costs have been the drivingforces behind today’s global trading system. Geopolitics has also played adecisive role in advancing and reinforcing these structural trends. In the last 30 years, world merchandise and commercial services tradehave increased by about 7 per cent per year on average, reaching a peak ofUS 18 trillion and US 4 trillion respectively in 2011. When trade is measuredin value-added terms, services play a larger role. Between 1980 and 2011, developing economies raised their share in worldexports from 34 per cent to 47 per cent and their share in world imports from29 per cent to 42 per cent. Asia is playing an increasing role in world trade. For a number of decades, world trade has grown on average nearly twice asfast as world production. This reflects the increasing prominence ofinternational supply chains and hence the importance of measuring tradein value-added terms. Simulations show that in a dynamic economic and open trade environment,developing countries are likely to outpace developed countries in terms ofboth export and GDP growth by a factor of two to three in future decades.By contrast, their GDP would grow by less than half this rate in a pessimisticeconomic and protectionist scenario, and export growth would be lower thanin developed countries.45
world trade report 20131.The evolution of internationaltrade: insights from economichistoryUnderstanding the future shaping factors of worldtrade begins with an understanding of the historicalforces that created the global trading system we havetoday. The rise of a world trading system, like so manyother features of the modern world economy, beganlargely with the industrial revolution. The immensetechnological advances in transportation andcommunications that it unleashed – from steamships,railroads and telegraphs to automobiles, aeroplanesand the internet – steadily reduced the cost of movinggoods, capital, technology, and people around theglobe. This “death of distance”, to use the modernmetaphor, has been one of the most important forcesshaping global economic development since the early1800s (Cairncross, 1997).The rise of a world economy, the spread of investmentand technology, the growth of internationalspecialization, the ascent of new economic powers, thedramatic surge in growth and population – none of thisin turn would have been possible without a massiveexpansion of global trade over the past 200 years. Atthe same time, the spread of industrialization – first toEurope, next to the Americas, and then to Asia, Africaand elsewhere – fuelled a further expansion ofinternational trade and economic integration. Since themid-1800s, the world’s population has grown roughlysix-fold, world output has grown 60-fold, and worldtrade has grown over 140-fold (Maddison, 2008). Thisvirtuous circle of deepening integration and expandinggrowth is what we now refer to as globalization.While underlying technological and structural forcesare the main drivers behind globalization, politicalforces play an equally central role – sometimesfacilitating and cushioning the rise of a globallyintegrated market, other times resisting or reversing it.Karl Polanyi’s insight that a global free market is notonly impossible, but doomed to self-destruction in theabsence of effective international cooperation looksas valid today as it did when he first advanced it in1944 (Polanyi, 1944).46It is difficult to imagine the rise of globalization duringthe 19 th century without the gold standard, the denseweb of bilateral trade agreements, and Great Britain’seconomic dominance, just as it is difficult to imaginethe post-1945 resumption of globalization without theadvent of the new multilateral economic institutions,more activist economic and social policies at thedomestic level, and America’s assumption of the globalleadership mantle. Indeed, the evolution of globalizationover the past 200 years has generally beenaccompanied not by a contraction of government butby its steady expansion at both the national andinternational level (see Section C.6).Yet at other times, politics has intervened – sometimesconsciously, sometimes accidentally – to slow down oreven roll back the integrationist pressures oftechnology and markets. It is this complex interplay ofstructural and political forces that explains thesuccessive waves of economic integration anddisintegration over the past 200 years; and in particularhow the seemingly inexorable rise of the “first age ofglobalization” in the 19 th century was abruptly cutshort between 1914 and 1945 – by the relatedcatastrophes of the First World War, the GreatDepression and the Second World War – only to befollowed by the rise of a “second age of globalization”during the latter half of the 20 th century. While thelong-term trend has been in the direction of expandingtrade and deeper integration, unpredicted (andperhaps unpredictable) geopolitical shocks haveperiodically interrupted or reversed this trend,suggesting the need for caution in extrapolating fromthe economic past into the economic future.(a) The first age of globalizationThe early 19 th century marked a major turning point forworld trade. Although the outlines of a world economywere already evident in the 17th and 18th centuries – asadvances in ship design and navigation led to Europe’sdiscovery of the Americas, the opening up of new routesto Asia around Africa, and Magellan’s circumnavigationof the globe (Maddison, 2008) – it was the arrival of theindustrial revolution in the early 1800s which triggeredthe massive expansion of trade, capital and technologyflows, the explosion of migration and communications,and the “shrinking” of the world economy, that is nowreferred to as “the first age of globalization” (Ikenberry,2000). In particular, breakthroughs in transporttechnologies opened up national economies to tradeand investment in ways that differed radically from whathad gone before, relentlessly eroding what economichistorian Geoffrey Blainey has termed “the tyranny ofdistance” (Blainey, 1968).Steam power was the first revolutionary technology totransform transportation, starting with steamships.Although early vessels were initially limited to inlandrivers and canals, by the late 1830s steamships wereregularly crossing the Atlantic and by the 1850s aservice to South and West Africa had begun. At first,steamships carried only high-value commodities, suchas mail, but a series of incremental technologicalimprovements over subsequent decades – screwpropellers, the compound and turbine engine, improvedhull design, more efficient ports – resulted in faster,bigger, and more fuel-efficient steamships, furtherdriving down transport costs, and opening up transoceanic steamship trade to bulk commodities, as wellas luxury goods (Landes, 1969).The opening of the Suez Canal in 1869 marked afurther breakthrough in trans-oceanic steam shipping.Until then, steamships could not carry enough coal to
II – Factors shaping the future of world tradecircumnavigate Africa leaving sailing ships still dominanton Far Eastern trade routes. By creating a major shortcut to Asia from Europe, the Suez Canal suddenly madesteamships viable, and most cost efficient on theseroutes as well, completing their conquest of transoceanic shipping by the end of the 1800s.The importance of inland waterways was soon eclipsedby the railway boom. The world’s first rail line, theStockton and Darlington Railway, opened in 1825, andwas soon copied, not just throughout Britain, but inBelgium, France, Germany and the rest of WesternEurope. The explosion of railways was particularlynotable in the United States during the second half ofthe 19 th century, where new trans-continentalnetworks would play a major role, not just in thesettlement of the West and in forging a nationaleconomy but in linking the vast American hinterland toglobal markets (O’Rourke and Findlay, 2007). Atranscontinental line linked the East and West coastsof the United States by 1869; the Canadian-Pacificrailroad was completed by 1885 and the trans-Siberianrailway by 1903. The decade prior to the First WorldWar also saw an explosion of railway building inArgentina, India, Australia, China and elsewhere,largely financed by British capital. From virtuallynothing in 1826, almost a million kilometres of rail hadbeen built by 1913 (Maddison, 2008).If steam power revolutionized trade in the first half ofthe 19 th century, a wave of even newer technologies –such as refrigerated ships and submarine telegraphcables – contributed to a further lowering of trade andcommunications costs and a deepening of globalintegration in the second half of the 19 th century.Refrigeration had major trade implications. Developedin the 1830s and refined over the following twodecades, mechanical refrigeration meant that chilledbeef could be exported from the United States toEurope as early as 1870; by the 1880s, SouthAmerican meat, Australian meat and New Zealandbutter were all being exported in large quantities toEurope (Mokyr, 1990).The arrival of the electronic telegraph in the 1840s wasanother transformative event, ushering in the modernera of near instantaneous global communications. Thefirst successful transatlantic telegraph message was1870 4.61913 7.91950 5.51973 10.51998 17.2Source: OECD (2001).sent in August 1858, reducing the communication timebetween Europe and North America from ten days – thetime it took to deliver a message by ship – to a matter ofminutes. By the end of the 19 th century, British-,French-, German- and US-owned cables linked Europeand North America in a sophisticated web of telegraphiccommunications.International trade increased rapidly after 1820,underpinned by falling transport and communicationscosts. Inland transport costs fell by over 90 per centbetween 1800 and 1910; transatlantic transport costsfell roughly 60 per cent in just three decades between1870 and 1900 (Lundgren, 1996). Meanwhile, worldexports expanded by an average of 3.4 per centannually, substantially above the 2.1 per cent annualincrease in world GDP (Maddison, 2001). As a result,the share of trade in output (or openness) rose steadily,reaching a high point in 1913 (see Table B.1), justbefore the First World War, which was not surpasseduntil the 1960s (Maddison, 2001).II B. Trends ininternational tradeRailways were the other major steam-related transportinnovation of the industrial revolution. Inlandtransportation costs had already started to fall in thelate 18 th century as a result of road and especiallycanal construction. The length of navigable waterwaysin Britain quadrupled between 1750 and 1820; canalconstruction in France also soared while in the UnitedStates the massive Erie Canal, constructed between1817 and 1825, reduced the transportation costsbetween Buffalo and New York by 85 per cent and cutthe journey time from 21 to eight days (O’Rourke andWilliamson, 1999).Table B.1: Share of world exports in world GDP,1870-1998 (percentage)(b) A growing division of labour anda widening wealth gapThe vast expansion of international trade in the19 th century enabled countries to specialize in theproducts at which they were most efficient, thusreinforcing and accelerating the international divisionof labour. Although trade also helped to diffuse newtechnologies and products – and to reduce thehandicap that countries with limited natural resourceshad hitherto faced – industrialization and developmentspread unevenly, with Britain taking an early lead,followed by Western Europe, North America, and muchlater Japan. Thus, even as global economic integrationdeepened in the 19 th century, the income gap betweena fast-industrializing North and a raw-materialsupplying South widened – a process economichistorian Kenneth Pomeranz has called “the greatdivergence” (Pomeranz, 2000).Dramatically falling transport costs resulted not just inincreasing volumes of trade but also in tradediversification. Before the industrial revolution, the vastmajority of goods and raw materials were too difficult orexpensive to transport over great distances, with theresult that only goods with the highest price-to-weightratio – spices, precious metals, tea and coffee – weretraded. However, as steamships replaced wooden47
world trade report 2013sailing vessels, and as railways replaced transportationby horses, a greater variety of commodities weresuddenly accessible to the world’s industrial centres,and a much wider range of manufactured goods wereavailable to the rest of the world.Over the course of the 19 th century, trans-oceanictrade in grains, metals, textiles and other bulkcommodities became increasingly common.1 Afterthe mid-19 th century, European farmers increasinglyfound themselves in direct competition with the vastand highly productive farms of the Americas andRussia. 2 Despite a fast-growing population andlimited arable land, food prices in Britain stoppedrising in the 1840s and started falling thereafter(O’Rourke and Findlay, 2007; O’Rourke andWilliamson, 1999).Declining food prices benefited industrial workers andurban consumers – helping to fuel furtherindustrialization and urbanization – but disadvantagedlandowners and farm labourers. According toPomeranz, one of the key factors that facilitatedEurope’s rapid industrialization throughout the 1800swas the vast amount of fertile, uncultivated land in theAmericas which could be used to grow the largequantities of agricultural products needed to feed afast-expanding European population, thereby allowingEurope’s labour and land to be freed up for furtherindustrialization (Pomeranz, 2000).At the same time, the Americas, Asia and Africa servedas an expanding market for European manufacturedgoods. Just as farmers in industrialized countries facedpowerful new competition from highly competitiveagricultural producers in the New World, developingcountry artisanal and craft producers also foundthemselves out-competed and overwhelmed by morecapital- and technology-intensive producers in the fastindustrializing North (Bairoch and Kozul-Wright, 1996).Massive inflows of European manufactured goods,particularly of textiles and clothing, throughout the19 th century resulted in what economic historian PaulBairoch describes as the “de-industrialization” of thedeveloping world, both in absolute and relative terms.The destruction of India’s textile industry was astriking example, but a similar de-industrializationprocess was taking place in China, Latin America andthe Middle East (Bairoch and Kozul-Wright, 1996).The developing world saw its share of globalmanufacturing fall from over a third to less than atenth between 1860 and 1913 (Bairoch, 1982). Onlyafter the turn-of-the-century did the downturn in thedeveloping world’s industrial capacity begin toreverse.48Improved transport and communications allowedpeople and capital as well as goods to move morefreely across the globe, further fuelling the growth ofoverseas markets, providing new investments intransport and communications infrastructure, anddriving up the pace of global integration. From 1820 to1913, 26 million people migrated from Europe to theUnited States, Canada, Australia, New Zealand,Argentina and Brazil. Five million Indians migratedwithin the British Empire to destinations such asBurma, Malaysia, Sri Lanka and Africa. An even largernumber of Chinese migrated to countries around thePacific Rim and beyond (Ravenhill, 2011).The opening up of the Americas, Australasia andNorthern Asia to new settlement required massivecapital investments, especially in railways. After 1870,there was a massive outflow of European capital foroverseas investments. By 1913, Britain, Franceand Germany had investments abroad totalling overUS 33 billion; after 1870, Britain invested morethan half its savings abroad, and the income from itsforeign investments in 1913 was equivalent to almost10 per cent of all the goods and services produceddomestically (Maddison, 2001). Moreover, this capitalflowed increasingly towards the developing world.Between 1870 and 1914, the share of British investmentgoing to Europe and the United States halved, from52 per cent to 26 per cent of the total, while the shareof investment absorbed by Latin America and Britishcolonies and dominions rose from 23 per cent to55 per cent (Kenwood and Loughheed, 1994).A new global economic landscape – defined by anadvanced industrial “core” and a raw-materialsupplying “periphery” – gradually took shape over thecourse of the 19 th century, reflecting the increasinginternational division of labour (O’Rourke and Findlay,2007). For Britain in particular, trade with its Empireand dominions was more important than trade withother industrialized countries. For example, in 1913,Britain imported more from Australia, Canada andIndia (and some others) combined than the UnitedStates – despite the latter’s importance as a supplierof cotton for Britain’s textile industry – and it exportedfive times as much to these countries as to the UnitedStates. Similarly, France exported more to Algeria thanto the United States in 1913 (Ravenhill, 2011).Even among industrialized countries, trade was largelydominated by primary products until after the FirstWorld War. According to Kenwood and Lougheed(1994), at its peak in 1890, agriculture and otherprimary products accounted for 68 per cent of worldtrade, declining slightly to 62.5 per cent by 1913(Kenwood and Lougheed, 1994). At the outbreak ofthe First World War, primary products still constitutedtwo-thirds of total British imports (Ravenhill, 2011).If incomes within the industrialized core generallyconverged during the 19 th century, incomes betweenthe core and the periphery of the world economydramatically diverged. Many economists, beginningmost notably with Raul Prebisch in the 1950s, haveargued that this divergence was a result of the growing
II – Factors shaping the future of world tradeinternational division of labour, especially the way theirgrowing dependence on raw material exportsprevented poorer countries from industrializing. 3Although commodity specialization brought someperiphery countries significant economic benefits –Argentina, for example, had among the world’s highestper capita income in 19134 – for many others,economic progress was modest or non-existent.The industrialized core also gradually expanded duringthis period. Britain was the undisputed economicpower in the mid-1800s, but by 1913 both the UnitedStates and Germany were contributing a larger shareof world output, as is shown in Table B.2. While in1870, no country had achieved a level of per capitaindustrialization half that of Britain’s, by 1913 Ge
WORLD TRADE REPORT 2013 44 A comprehensive and fruitful analysis of the shaping factors of international trade and their implications for trade policy cannot be performed without having a clear idea of the evolution of trade patterns over time. This part of the Report analyses past, present and future trends in international trade
trends in selected trade policy instruments, including illustrative statistics. The second part is divided into four chapters: tariffs, trade agreements, non-tariff measures and trade defence measures. Trade trends and statistics are provided at various levels of aggregation illustrating the use of the trade policy measures across economic
INTRODUCTION 1 UNIT 1: INTERNATIONAL FINANCE 3-31 1.0 Introduction 1.1 Objectives 1.2 Importance of International Finance 1.3 Finance Function in Multinational Firms 1.4 International Trade 1.4.1 Basis of International Trade 1.4.2 Trends in International Trade 1.4.3 Cross-border Financial Flows 1.4.4 Gains from International Trade 1.5 Balance .
The impact of trade, page 2 INTRODUCTION Approximately 80 percent of global trade relies on some version of trade finance. The financing options may vary between open accounts, interfirm trade credit, or bank-intermediated trade finance (Chauffour and Malouche, 2011). During the latest financial recession, short-term trade finance fell .
recent trends and the role of the WTO The World Trade Report 2014 looks at how many developing economies are successfully leveraging trade for rapid growth. It focuses on four recent trade trends - the rise of new global players, the spread of production chains, increasing commodity prices, and growing economic interdependence. These trends
Recent trends in global trade and global value chains 39 or final goods. Trade in intermediate goods contributed more than trade in final goods did to the growth of total manufactur-ing trade in 2001-08 and 2009-14 and to its decline in 2000-01 and 2008-09 (table 2.1). Trade in final goods contributed more
General Agreement on Trade in Services (GATS) in the World Trade Organization (WTO) in 1994, and in past U.S. free trade agreements, all of which contain significant provisions on market access and rules for liberalizing trade in services. Trade negotiations involving trade in services currently under discussion include the following:
Defining trade-based money laundering and trade-based terrorist financing 11 Trade process and financing 12 Section 2. Trade-based money laundering risks and trends 15 Risk-based approach to trade-based money laundering 16 Economic sectors and products vulnerable to TBML activity 20 Types of businesses at risk of trade-based money laundering 24
American Revolution, students are exposed to academic, domain-specific vocabulary and the names and brief descriptions of key events. Lesson 2 is a simulation in which the “Royal Tax Commissioners” stamp all papers written by students and force them to pay a “tax” or imprisonment.
