Key Issues of Global Trade - Coursework Example

Running Head: GLOBAL TRADE Name Course Instructor Date Global Trade With increased globalization and technological advancement has facilitated increased global trade not only in developed nations but in developing countries. In my view global trade can be defined as the constant exchange of goods and services across global borders. International trade in most countries represents a very significant share of the country gross domestic product. Even with the fact that global trade has been there in our history, the global trade social, political and economic importance has significantly risen in recent years (Cross, 2004). It is evident that globalization, growth in multinational corporations, industrialization, outsourcing and advance transportation have a main impact of global trade. From various reports it is quite evident that that increased global trade plays an important role in ensuring globalization continuity. It is quite evident that without global trade, countries would be limited to their own goods and services. Trade plays an important role in increasing interdependent and interconnected globe thus making up the world economy (Cross, 2004). Reports in 2005 indicate that the value of global exports was over 10.3 trillion whereby one third originated from developing nations and a third was also sold to these nations. Recent increase in global trade has largely been facilitated by various factors taking place within the trade environment. Clearly, although technological enhancement, improved trade laws and agreements and increased consumer preferences have been the main reason for the increased trade they have and will continue to influence the pattern as well as economic integration across the globe (Arora and Vamvakidis, 2004). It is quite evident that improvement in transport and communication technologies has enhanced global trade through fostering investment and innovation enhancing economic integration. According to Arora and Vamvakidis (2004) transport and communication services play an important role in the process of economic growth with key focus on global trade. Both communication and transport allow the effective integration of local goods production into world supply chains which in turn bring domestically produced goods directly to global markets. It is quite evident that over years trade has played a key role in economic development. Clearly, global trade has the potential in reducing global trade which is one of the millennium development goals (Feng, 2007). Global trade reduces poverty through creating jobs, increasing variety of goods and services, assisting nations in acquiring technologies and enhancing economic growth. Clearly, the buying as well as selling of goods and services is the backbone of our commercial and modern world and therefore many nations aim at making more profits from expanded market as opposed to engaged in limited selling and buying in their own local borders. Nation such as China, India, Brazil and Korea today are considered to have a strong base in international trade have become more prosperous and are constantly beginning to have power in controlling the globe economy. The fact that there are various relative costs benefits various parties ranging from individuals to companies. It is quite evident that benefits of global trade are largely dependent on the opportunity cost of production (Feng 2007). The opportunity cost of production is defined as the amount of production of one commodity is reduced so as to increase the production of another commodity by one unit. Global trade has been debated to be one of the key elements for nation to develop their own needs through ensuring they meet their market and societal needs. Global trade promotes efficiency in production as nation are in a better position to adopt effective method of production to keep down cost down while at the same time to ensure it remain competitive. It is quite evident that nations that are able to produce goods at a lower cost are able to gain a more lager share in the market (Kuo and Yang 2008). This in turn assists in increasing the standard of the goods and thus the customer are table to obtain the best quality. Additionally, international trade through the various goods and services it offers, consumer are able to choose from a wider array of goods thus helping the country grow in term of diversity. Nations are able to have efficient allocation as well as better resource utilization since countries tend to produce goods thus giving them a comparative advantage. It is quite evident that when nations are able to produce goods through a comparative advantage and therefore in a position to avoid duplication as well as destruction of resources. Better utilization of resources assists in minimizing pollutions and provides countries with better marketing power (OECD 2003). Even with much emphasis on the positive effects of global trade there are various negative impacts that are linked to this type of trade. Firstly, nations can engage in importing harmful goods that are sub standard. Reports indicate that global trade may lead to importation of harmful goods such as drugs and cigarettes. Additionally, global trade has various cultural identity issues. Evidently, culture is considered to be a major export in the world in that it promotes as well as displays lifestyles and values across the world (OECD 2003). The growth in global trade have resulted from many tariffs and laws been created. The numerous global free trade agreements have been designed so as to remove duties, tariffs and other numerous barriers that hinder effective exchange of goods and services. Nevertheless, it is quite evident that free trade agreements have also given rise to poverty through giving organizations a greater and integrated labor pool which as a result increases competition. The free trade agreements have since corporations seek out locations which have cheap labor (Parikh and Stirbu 2004). It is quite evident that as world economies are becoming more integrated there is need to engage in analysis on various policy issues connected to global trade. Analysis play an important role in obtaining data and information that can lead to the development of policies that will enhance global trade for both developing and developed nations (Samuelson, 2001). The recent global crises affected the world trade and thus many developing countries were affected in the importation and exportation of goods and services and thus there economic growth was affected drastically. Proper policies need to be put in place so as to ensure that all nations work together through ensuring that such financial crises do not occur (Samuelson, 2001). Today, there are shifting pattern from agricultural to service sector require adaptation of policies that ensure both industrial and services of developing and developed nations. The globe economy has undergone major changes in recent years and there is need to ensure these changes will shape global trade in the coming years. There is need for new strategies that will ensure global trade create more opportunities as opposed to challenges to the all nations (Samuelson, 2001). Clearly, globalization is changing the shape of the global trend and therefore need to adopt new technologies, enhancing policy openness as well as increased social adaptation. Additionally, both political and economic gravity is shifting and need to enhance global alliance and understanding on the different emerging issues. The Asian economies are taking over the globe trade and there is need for other developing nation to borrow a leaf from them. Internalization of communities if wisely and effectively adopted enhances global investment and trade. Recently, it is evident that the rising of global trade shares accounted for by developing and emerging economies are striking feature of the general growth in global product as well as factor movement in recent years (Frankel, Romer and Cyrus, 1996). The world shift in economic powers offers numerous opportunities and if well used it can be influential in poverty eradication. Despite the fact that power shift has its own challenges, it is necessary for the economies with power to establish new global cooperation as change in this shift call for vision as well as statesmanship by leaders (Shiozawa, 2007). Today, there is massive technological shift especially due to increased internet usage across the globe. It is evident that new technologies adopted today have shrunk the cost of distance as well as the low cost of communication. Reducing the communication and transportation has placed premium on global trade efficiency (Shiozawa, 2007). It is important for nations to adopt these new technologies so as to significantly nurture the internationalization of production and establish strong value chain. New technology in communication can be adopted so as to revolutionize industries across the globe. With these technologies, industries can adopt innovations to enhance off shoring and value chain system to ensure there is effective global trade. Nations need to work together to ensure sound trade policies are put in place to avoid exploitation of developing nation who are perceived to have a rich resource base compared to developed countries. Good international partnership and collaboration has contributed to a good environment for global trade (Frankel, Romer and Cyrus, 1996). This business environment has facilitated both foreign and domestic investment thereby promoting export and production growth. From my point of view it is evident that political instability or poor international and regional linkages drives away investors. As value for economic diversification, it is necessary that policies affecting value chain to be well developed. This will ensure that these value chains offer diversification of opportunities thus improving standards of production through enhanced transparency (Shiozawa, 2007). It is quite evident that the globe is becoming darker in term of transparency and accountability and therefore World trade Organization define transparency and accountability as key principle towards successful global trade. There is need for nations to adopt a transparent approach in matter of communication, policies formulations and decision making. Absence of commitment to transparency obstructs a principle weakening the global system and this result to culture opacity (Frankel, Romer and Cyrus, 1996). Transparencies can be strengthening through domestic dialogue on trade policies. Government need to embrace transparency as their key principle for conducting trading relations as this will ensure policy data extension. Government should be willing to supply open dialogue on share trade policy information though building trade review committee to facilitate the process of transparency. References Arora V. and A. Vamvakidis (2004), How much do trading partners matter for economic growth?, IMF Working Paper, 04/26, Washington: International Monetary Fund. Cross, K.H. (2004), China's WTO accession: economic, legal, and political implications,Boston College International and Comparative Law Review, 27(2), 319-370. Feng Y. (2007), Productivity growth in Chinese economy and industries, Recent Development in the Chinese Economy, NOVA Science Publishers, Inc., 83-134. Frankel, J., Romer, D. and Cyrus, T. (1996), Trade and growth in East Asian countries: cause and effect?, NBER, Working Paper 5732, August. Kuo C.C. and C.H. Yang (2008), Knowledge capital and spillover on regional economic growth: Evidence from China, China Economic Review, 19(4), 594-604. OECD (2003), The Source of Economic Growth in OECD Countries, Paris: Organization for economic cooperation and development, 2003. Parikh A. and C. Stirbu (2004), Relationship between trade liberalization, economic growth and trade balance: An econometric investigation, HWWA Discussion Paper, 2004-282. Samuelson, P. (2001). "A Ricardo-Sraffa Paradigm Comparing Gains from Trade in Inputs and Finished Goods". Journal of Economic Literature 39 (4): 1204–1214. Samuelson, Paul (2001). "A Ricardo-Sraffa Paradigm Comparing the Gains from Trade in Inputs and Finished Goods". Journal of Economic Literature 39 (4): 1204–1214 Shiozawa, Y. (2007). "A New Construction of Ricardian Trade Theory: A Many-country, Many-commodity with Intermediate Goods and Choice of Techniques". Evolutionary and Institutional Economics Review 3 (2): 141–187. Read More