facts about international trade

Little Known Facts About International Trade – And Why They Matter

Linkilaw Business Structures, International Business

International trade is the exchange of goods or services between countries and along international borders. And whether we are aware of it or not, it affects the daily life of all of us. If it weren’t for international trade, you’d never be able to get your hands on, say, a mango, or a cup of coffee, or a silk blouse. Your car would have no oil to run on, assuming you even managed to get a car.

For many products and services, even if it were a simple T-shirt, you’d be paying a much heftier price. There is no denying it: thanks to international trade, our products and services have become global, and so has our entire world. This process of international trade means greater market competition, which brings about a much more competitive pricing for the consumer, so customers or clients get to enjoy a wider range of options at a lower price.

 

So far so good, right? On an individual level, absolutely. But the higher the level, the more convoluted the matter gets. And more disproportionate: the 30 richest countries control 82 percent of world trade, while 49 poorest countries take just 2 percent of the same cake. The numbers can be very fickle, too: for example, Canada swinged from a -5.2 billion USD trade deficit in 2013 to a 10.9 billion USD surplus for 2014.!

However, a negative trade balance or trade deficit (i.e. when a country imports more than it exports) doesn’t necessarily mean the country’s economy is in decline. Take the US, arguably the richest and most powerful country in the world, that is currently at a trade deficit of 47 billion USD. Albeit seemingly paradoxical, some experts associate this trend to positive economic developments: more and larger investments, and higher levels of income.

According to them, the deficit merely indicates the US is importing capital to invest in some other capacities, and will even result in raised domestic employment rates. What is more, economists claim such a large deficit can be partially assigned to a widespread consumer culture. The negative balance only reflects the material values and want for imported goods among the members of its population – no matter the cost (literally).   

 

And where does the UK stand in this regard?

 

According to the latest bulletin released by Office for National Statistics, total UK exports of services (excluding travel, transport and banking) in current prices are constantly on the rise. In 2014, a 2.1% increase has been recorded – from £117,193 million in 2013 to £119,703 million in 2014. However, the UK is the 7th leading importer and the 12th leading exporter in the world, a ratio which is the culprit of a rather substantial trade deficit; the trade gap amounted to to 4.84 billion £ in February this year.

Luckily, given that the UK is such a heaven for foreign investors, new investment capital allows the country to fund the deficit. Namely, the value of investments per year far surpasses the money the UK loses through the negative trade balance.

International trade is such a vast and inexhaustible subject that we could go on about it for days. But for now, here’s a handful of little-known or often overlooked facts on international trade.

For example, did you know that:

 

  • Trade expansion generates higher paying jobs in export sectors, facilitates investments and boosts economic growth?

 

Quoting the EU Commission’s white paper on trade, jobs and growth, by operating on both supply and demand, trade is a powerful tool to boost economic growth: ”More trade is also essential to job creation: About 30 million jobs in the EU depend on sales to the rest of the world, an increase of 10 million since 1995. On average, each additional €1 billion of exports supports 15000 additional jobs across the EU .”

 

 

  • International trade can help fight poverty?

 

 

Contrary to some opinions, international trade can, and does, help fight poverty. Huffington post mentions that by increasing their share in world trade, least developed countries reduced poverty (defined as people living with less than 1.25 USD a day) from 65% of the population in 1990 to 45% in 2010.” In addition, a 10 percentage point increase in trade openness translates into 4% increase in per capita income, as stated by this OECD’s paper.

 

 

  • In the last couple of years, trade liberalising measures saw a boost of 60%?

 

 

Thanks to such measures, you as a consumer get to enjoy more products and services for a fraction of the price you’d normally have to pay. While trade reforms can put in jeopardy some jobs and some industries in certain countries, the overall effect of trade liberalisation is undoubtedly a positive one. It helps lower the prices, widen the range of options available, and ensure a higher overall quality of the products and services offered.

 

 

  • World Trade Organisation counts 161 member countries?

 

 

This figure accounts for 98% of world trade, which unquestionably means a dizzying array of choice for the end consumer. Yes, this is one of the reasons why your head is sometimes swimming in confusion while you’re walking down your supermarket aisle.

Final Note On International Trade And Your Business

On a related note, here is the link to our recent post on what legal things you need to keep in mind if you’re running an international business – in case you’ve missed it.

 

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