How Has the Composition of Trade Changed since the 1960s Both within and between Different Countries - Essay Example

Name Professor Institution Title Date HOW HAS THE COMPOSITION OF TRADE CHANGED SINCE THE 1960S BOTH WITHIN AND BETWEEN DIFFERENT COUNTRIES Trade Introduction Trade is an activity that takes place between individuals known as the traders. It involves the exchange of goods and services for a price amongst individuals. Once trade has taken place, ownership of the commodities transfers from the buyer to the seller automatically (Farrell, C. A. 2008). The transaction has to involve two individuals and above, that is, there has to be two parties or more. There is a physical location for carrying out trade amongst the individuals. This location is known as the market which can be either physical or virtual. The main aim of carrying out trade with other countries or individuals is to get what they cannot produce by trading with others. This is to mean that they trade with an aim of getting what they lack by giving what they have (Kandogan, Y. 2003). There is a network that encourages trade, which is a market. It provides a place where individuals can meet and carry out trade. Market can be in form of a physical location or through the internet. There is a common medium for using when carrying out trade, which is money or the acceptable currency. Trade takes place between individuals who can be a country, organizations or companies. Countries trade with other countries through the foreign exchange by selling their products or services in such countries or investing in the country (Carr & Stone 2009). For instance, a country that does not produce oil can trade with one that produces so that they get it. Trade makes it easier to use what you do not produce because you can purchase it fro those that produce the commodity or service. The use of currency is when trade is taking place between a country and another so that they use a common measure of value for their commodities or services. Forms of trade Trade can be in form of barter, which involves the exchange of commodities for other commodities or for service and another service. This form of trade does not involve money or currency. Barter trade was a common means of trading in the olden days when there was no discovery of money (Carr & Stone 2009). Negotiation between traders was in form of goods, that is, there was no measure of value in terms of money. Measure of the value of commodities was by estimating, which was not very accurate. The other form of trade is trade that involves the use of paper money. In this form, trade involves exchange of commodities or services for money. It does not necessarily involve the exchange of one commodity for another (Farrell, C. A. 2008). Another category of trade is the local and international trade. Local trade involves exchange between individuals in the same country. For instance selling and buying of commodities or services within a country. In this form, they use the form of currency in that country and goods and services do not move outside the country. International trade consists of trade without the country, that is, exchange between different countries. For instance, buying and selling commodities and services between China and Malaysia (Kandogan, Y. 2003). The countries trading use a common currency like the US dollar to pay for the price of the goods of trade. The items of trade in this case physically move from selling country to the buying country. Specialization of products or skills enhances international trade. It is through this that some countries have comparative advantage than others because of the goods or services that it produces. Retail and wholesale is the other category of trade. Retail involves selling goods in small scale from a physical location, like shops or boutiques. Wholesale entails selling in large amounts like supplying products to companies or institutions. Trade can also be done in the financial markets. It entails investments like buying and selling of shares and bonds in the financial market of a particular country. Composition of trade Composition of trade forms part of essentials of trade, which include the items of trade and the traders. The composition of trade depends on an individual country and the kind of goods that it produces (Pomeranz & Topik 2006). The major composition of trade is goods, services and other intangible products like stocks and bonds. The constituents of trade are what individuals use to trade meaning they form trade. However, there are goods that are common everywhere like the consumer and capital goods. Durable and perishable goods also form part of the composition of trade because they type that countries or individuals trade in. The composition is the goods and services which countries or individuals trade in. Trade cannot take place without the presence of all these composition of trade. Trade cannot occur without the items or the traders who carry out the activity. This comprises of the exports and imports of a specific country. The composition of trade determines how a country carries trade within its boarders and with other countries (Mitra, P. 2008). The composition of trade in a country like the US is different from that of Canada because the goods and services from the two countries differ. In case the composition of a country lacks a certain product it looks for a country whose has the composition that it requires. The composition of trade of US includes both consumer commodities like food and other goods that they manufacture. Stocks in one country are different from another hence making the composition of trade dissimilar. Factors contributing to change in the composition of trade There is a big change in the composition of trade in the world from the previous decade due to several factors. Some of these factors are like the emergence of technology in the world and the need to avoid lagging behind. The increase in the population in the world has also led to the changes in the composition of trade (Ravenhill, J. 2008). Due to the increase in population, many items are in the composition. Industrialization in the world contributes to the change in the composition of trade because now countries are producing more goods hence; they can trade more. Climatic and environmental changes have also led to the changes. This is because today many items in trade do not come from nature because of the destructions on the environment. Many goods today are generic, unlike before when products were natural (Kandogan, Y. 2003). This cause has led to increase in the cost of natural products all over the world, while other countries import more of natural products than manufactured products. Emphasis on some policies by governments in countries has also led to these changes. Some governments encourage exports more than imports and others the vice versa (Pomeranz & Topik 2006). Others create an artificial shortage of some of the items of trade for their own gain, so the composition becomes less. The creation of such shortage reduces the composition of the items of trade at a particular time. Changes of the composition of trade There has been a change in the composition of trade in the world. The items of trade in use today are very different from in use in the 18th century in various parts of the world. In the ancient times, there was no paper money in use, that is, the trade then was barter trade only (Carr & Stone 2009). There was also the exchange of slaves for goods and services between certain countries in parts of the world. There is change of this trend because trade today does not involve slaves. There is increase in the quantity of goods and services that countries trade in today, unlike in the latter centuries where they were less in quantity (Farrell, C. A. 2008). There is improvement of the quality of these commodities because of technological improvements and industrialization. Due to specialization of labor, there is the increase of the amount of labor for trade from one country to another. Improvement of skills is also another characteristic that there is change in the composition of trade. Skills before were like knitting, weaving or poetry but today there are many more skills like business or accounting skills. Due to emergence of technology trade does not necessarily have to take place in a physical market. There are virtual markets like online markets where buyers purchase goods and even services without having to go to the physical market (Ravenhill, J. 2008). An example if this is the online marketing of digital products, which does not need a physical office and people can purchase digital products from anywhere in the world. This also means that there is increase in the trade items from the 18th centuries. In the modern world, there is emergence of trade of shares, bonds and securities which did not exist before. This trade takes place in the financial markets where buyers buy shares without going to the stock exchange physically (Mitra, P. 2008). This is also an addition of the items of trade which was not in existence in the previous decades. A trader can purchase shares from a foreign country or from his home country. This has led to the improvement of trade all over the world and has made trading easy. Changes in the composition of trade within countries Change in composition of trade in India The composition of trade in India constitutes what it produces by itself without importing from other countries. This is also what it exports to other countries in case of involvement in international trade (Mitra, P. 2008). The composition of trade in India is what the country has in terms of resources and what it produces to trade with other traders in the country. This includes the resources that they use to trade locally in the country. India imports product like fuel, paper, fertilizers and other chemicals. This country participates in agricultural products hence; the need to import likes fertilizers to use in farming and chemicals that they use for their agricultural sector. There are changes in the composition of the items of trade in terms of the exports in this country in that what the country produces changes from the 1960s. The local products that it produces include tea, tobacco and many other spices because India is an agricultural producing country (Ravenhill, J. 2008). These changes are noticeable in the kind of products that this country trades within itself like it does produce cotton like before, therefore, the need to import cotton among many other products. Another change in the composition of trade in India is the kind of exports that it exports to other countries. For instance, India produces machinery and fabric that it gets from the cotton it farms. This Due to the changes in the world like technological and industrial changes, India has had changes in the production of agricultural products. India today produces more of industrial product than the agricultural products like before (Mitra, P. 2008).There is change in the local trade within the country because of the changes in the composition of trade. India produces items of trade like chemicals, which was not an item of trade in the 1960s but it is today. This shows there is the change in the items of trade and its composition. Composition of trade within Australia Australia produces agricultural products like wheat and wool. They then manufacture the wool to produce clothes that they trade with in the country and sell others through exporting. They also produce minerals like aluminum and copper which they refine to get other products for use and trade within the country. These refining is a change of the composition because in the 1960s there was no industrialization hence; the introduction of more items in trade. The industrialization has brought changes because it has led to the increase of the items of trade in Australia. This country produces goods that they sell in form of exports to other country. There has been the increase in the amount of exports by around 25.5% from the 1960s. Australia produces products like iron, gold and other products. Iron makes around 65% of the products that Australia produces (Ravenhill, J. 2008). It trades with this products within the country and exports them in cases where it is carrying out international trade with other countries. There are products that Australia does not produce, hence the need to import them from other countries. The composition of trade that it imports is many including oil and energy products. There has been increase in the importation of energy products from the 1960s by 13.8% because of the need to industrialize (Farrell, C. A. 2008). The import of services that Australia does not have has been on the rise by around 5.5%. This shows the changes that have taken place in the composition of trade over time in Australia in the kind of goods that it produces and trades with. Changes in the com position of trade between countries Trade takes place between countries so that a country gets what it cannot produce. This is because countries lack enough resources to produce everything to satisfy the needs of its citizens. A country sells to other countries what it can produce and in turn get what it cannot produce through trade with other countries (Pressman, D. 2011). This is through the composition of exports and imports which constitute the items of trade and its composition. Many changes have taken place in this composition since the 1960s when the international trade had begun and many countries were getting into it. There is change of trade items between countries over the last years since the 1960s to today. The major cause of this is the changes in the composition of trade within the individual countries and other changes taking place in the world. The composition of trade for countries trading between themselves is also the composition of their exports (Mitra, P. 2008). The effect of these changes has both positive and negative effects on the countries that trade with each other. We shall look at the changes in the composition of trade in the countries and the effects they have on them. As we address this issue, we shall look at trade between specific countries and how change has taken place over certain duration of time. Composition of trade between Australia and America There was bilateral trade between these two countries in the 1960s and up to today. There was the trade through the imports and exports of the both countries. There has been a change in the composition of trade in these countries due to some factors over time. Political changes in the Latin America have a role to play in the composition of trade because of the changes in the president which in turn affects the trade with Australia (Farrell, C. A. 2008). Economic changes in the two countries have also effects on their trade and composition which also affects the investment decisions by Australia to Latin America. Trade between these two countries has been on the rise since the 1960s noticeable in the amount of money that the trade gives to both countries. Australia imports much to Latin America because it constitutes more than 2.0% of its exports. The relationship between them is now that of partners unlike before where they were rivals and competitors. Income from the trade between the two countries is now more than US$3,500 million from the figure in 1960 which was US$a3 million (Farrell, C. A. 2008). That shows growth in trade between them which means the composition of trade has been on the raise. Composition of trade between China and MRB countries China trades with the Mekong river basin countries which comprises of about five countries including Thailand and Vietnam. The items of trade comprise the imports that China got from the MRB countries and the exports of China top them. The composition of the items was machinery from China, labor and manpower from both parties (Ravenhill, J. 2008). Change in the composition of trade has taken place from the 1960s due to increase and change of the items of trade. Change in the composition of trade has been as a result of population change in these countries. Trade between the countries was inclusive of movement of labor between them through the creation of job opportunities in the countries. To encourage this exchange of skills, there was the passing of a policy by China in 1978 to encourage open movement of labor and creation of opportunities in the countries. The benefit of trade between these countries is trade liberalization hence; increasing international trade and venture in the countries (Livermore & Smitten 2006). There has been remarkable increase in the income generation from trade between the countries leading to growth and development of their economies. There has been increase of the Gross domestic figures of each country over the years. For instance that of Thailand is currently at around 8700 and China is 6100. Changes in the world consumption of food affect the world’s composition of trade. This is because there is change in the consumption of food in the world since the 1960s due to some factors like urbanization or feeding patterns. Due to urbanization, there is production of very little food because people are not in the rural areas to farm crops (Livermore & Smitten 2006). Many people move to the urban places to look for jobs hence; the neglect of farming activities. The effect of this trend is reduction of farm products by countries that produce them, therefore, leading to high demand for them and in turn high prices for the products. The change in the consumer demands for various products also causes the changes in the composition of trade. This is because the change in the consumer patterns determines what items are in the market for trade. These changing patterns have led to changes in the goods that country trade with each other (Livermore & Smitten 2006). For instance, in the US where the citizens consume more of vegetables and fruits unlike before when their pattern did not include the above, therefore, the demand for fruits raises. In that case the US demands more of fruits from the country that they trade with and produces fruits. That means that that particular country has to produce more of fruits because its partner in trade demands more of it. References Carr, I & Stone, P. (2009): International trade law: Taylor & Francis. Farrell, C. A. (2008): Day trade online: John Wiley & Sons. Kandogan, Y. (2003): On types of trade, adjustment of labor and welfare gains during asymmetric liberalizations: the University of Michigan. Pressman, D. (2011): Your step-by-step guide to filling at the US: patent office: Nolo publishers. Pride, M. W. Hughes, J. R. & Kapoor, J. R. (2004): business: Houghton Mifflin company. Livermore, J & Smitten, R. (2006): How to trade in stocks: McGraw- hill professional. Pomeranz, K & Topik, S. (2006): The world that trade created: society, culture and the world economy to the present: M.E. Sharpe. Organization for economic co-operation and development. (2008): Globalization, transport and the environment: OECD publishing. OECD. (2005): Agricultural policies in OECD countries: monitoring and evaluation 2005: OECD publishing. International Monetary fund. (2010): Direction of trade statistics quarterly: international monetary fund publishers. Mitra, P. (2008): Innovation, inclusion and integration: from transition to convergence in Eastern Europe and the former Soviet union: World Bank publications. Ravenhill, J. (2008): Global political economy: Oxford University press. OECD. (2011): OECD economic surveys: Estonia 2011: OECD publishing. Jabbour, G & Budwick, P. H. (2010): the option trader handbook: strategies and trade adjustments: John Wiley and sons. Mann, R. A & Roberts, B. S. (2008): Smith and Roberson’s business law: Cengage learning. Boone, L. E & Kurtz, D. L. (2011): Contemporary business: John Wiley and sons. Grimwade, N. (2000): International trade: new patterns of trade, production and investment: Routledge. Plummer, M. (2004): Empirical methods in international trade: Edward Elgar publishing. Read More