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World Trade in Merchandise - Essay Example

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In the essay “World Trade in Merchandise” the author identifies and critically discusses four factors that may have contributed to the growth of world trade. The combination of short and long-run factors have contributed to creating a widened rise in the prices of the commodities…
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World Trade in Merchandise
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World Trade in Merchandise

Download file to see previous pages... Between the months of June and September, the price index lost 11.5 percent in terms of the dollar. (United Nations, 2009, p.45). The reason that can be identified for contraction in trade is a financial crisis. There was slow growth in output by almost 2 percent and the probability to fall further was high as well. The impact of the decline in total world production was magnified in trade. Since the month of September 2008, the imports and exports of the major developed and the developing countries declined. (World Trade Organization, 2009). The share of developing countries in the total global trade started to rise. It was assumed that a ‘decoupling effect’ would emerge into the picture and the developing countries will be less exposed to the economic downturn. As all regions of the World are slowing at once, the decline in demand conditions is more widespread than that of the past. The second reason that can be accounted for is the presence of increasing global supply chains in total trade. In the production process, the goods are supposed to cross many boundaries and the components in the final product are considered each and every time they cross a boundary. The only way to avoid such kind of effect is to measure the transactions in trade on the basis of the added value at each stage of the process of production. Shortage of trade finance can be regarded as the third reason for the situation. Shortage of trade has lead to a shortage of trade. This problem is receiving attention from government and other international institutions. The role of the WTO has been like an honest broker. It brings the top players to work together that will ensure the availability and also the affordability of trade finance. Protection is yet another factor that contributed to a contraction in trade. Rises in the level of protection are threatening to the prospects of recovery and delay the downturn. In the long run, the aggravated protectionism policy is a source of concern. 2. “Free trade, one of the greatest blessings which a government can confer on a people, is in almost every country unpopular” Lord Macaulay (1800-1859). It is true then and arguably very true today. (a) Critically discuss THREE forms of non-tariff barriers used by governments to limit the free flow of trade and assess their possible effects on consumers in any market of your choice. Nontariff barriers The three forms of nontariff barriers are imported quota, import licensing requirements, and import deposits. American firms have registered few grievances against Dutch firms. The Dutch came up as the neutral traders of Europe as they opted for a level playing field for trade matters. Soft drinks, beer, and petroleum products are the items where excise tax is levied. The excise tax is borne by the importers in addition to customs duty. The European Union aims to create a single international market and harmonize the excise taxes. Nontariff barriers are a measure used by the government to favor goods that are produced domestically over goods produced in foreign countries. The nontariff barriers are used to reduce the volume of imports so as to help the domestic producers. A quota may be defined as the maximum limitation either in physical units or in other terms imposed on imports of a product for a certain period of time. ...Download file to see next pagesRead More
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