International Trade - Factors That May Have Contributed to the Growth in World Exports - Essay Example

International Trade and of the Question a) Factors That May Have Contributed To This Growth In World Exports Between 2000 and 2008 Political Stability The increase in the volume of global exports between 2000 and 2008 may have resulted from the increased political stabilities among myriad countries in the world. A number of countries in Asia and Africa, which were facing political stabilities, are now experiencing impressive government policies; the formulated policies are more focused on the growth of trade, hence the economic stability. A nation such as North Korea is gaining momentum in terms of achieving a political and economic stability. Other countries that faced significant political turmoil, such as Yemen and Bangladesh, began to experience periods of stabilities at the beginning of 2000s. This situation might have resulted in increased international trade participation between various countries. In Africa, a number of countries, such as Liberia and Sudan, experienced political stabilities; these resulted in the two countries participating in the international trade. Statistics also indicate that a number of countries, which faced political stabilities as early as 2007 such as Sri-Lanka, have contributed to the increased world exports (Nicita, 2013). However, various efforts were made to ensure unstable countries were able to embrace stability. For instance, Cyprus, which faced political and economic instabilities as a result of the conflicts existing between Cypriots and Turkish, embraced polices that were likely to improve positive associations between the two groups. Other countries that have experienced increased levels of political stabilities in the recent past include Pakistan and Afghanistan. Generally, political stability ensures that a country is free from civil and across-the-border wars. This ensures that international traders are assured of safety and security; this creates a business environment that is likely to foster trade between businesses and individuals of different nationalities. Statistics also indicate that countries which are politically stable stand a high chance of establishing effective regulating and economic policies; these policies normally uphold the principles and values of the international trading (Saslavsky and Shepherd, 2013, p.18). With respect to the increased global exports between 2000 and 2008, it can be argued that this period was characterized by increased political stabilities with respect to various countries in the world. Technology Technology continues to underpin various aspects of economic growth in a variety of nations. Improved means of communications, productions and transportations play an important role in supporting an economy with regards to the growth of the global exports. The period between 2000 and 2008 has been associated with high levels of technological improvements. For instance, in the communication sector, individuals are able to communicate face-to-face via the video-conferencing technology. This mode of communication enables individuals to carry out conversation with respect to various issues associated with business. Various means of electronic communication, such as e-mails and use of social sites, have been on the rise in the period between 2000 and 2008. The modern means of communication such as the use of wireless devices, including mobile phones, has enabled an easy and fast communication between business partners of different nationalities. As a result, information regarding demand and supply in various economies is likely to be transferred faster than it was in the past. Similarly, improved means of transportation has also contributed to the increased global exports. Although shipping has been relied as a means of executing international trade among various international firms and business persons, other means of transportation, such as railway and air, are gaining popularity amongst various international businesses. For instance, the construction of an electric rail-road that joins Africa and Europe has experienced high levels of exports’ transportation. The underground electric rail-road (constructed below the Mediterranean ocean) is claimed to be faster than other means of transportation, such as road and sea. Other electric rail-road in other countries, such as that of Netherlands, has contributed significantly to increased levels of the global exports that were witnessed in the period between 2000 and 2008. In particular, this means of transportation is relatively cheap and faster compared to other means of transportations. However, sea, as a means of transportation, has gained momentum in terms of the volume of goods transported to various destinations in the world. In particular, the transportation of oil has been enabled by specialized oil tankers. Additionally, the fixing of refrigerators in diverse ships has enabled sea-transportation to transport perishable goods in different international destinations. Besides sea and rail-road, the air transportation has also witnessed various technological changes that have contributed positively to the global exports. For instance, the Boeing has been successful in making aircrafts that consume fuel economically. This has further resulted in reduced costs of transportation. As a result, a number of countries have been empowered to export various perishable products to distant destinations. Technological developments have also played other roles: this include increased knowledge of manufacturing the best and desirable products in certain economies that are normally demanded in other regions of the world. For instance, the period between 2000 and 2008 saw many individuals in the world acquire hand-held communicating devices. The manufacturing of a range of mobile phones in China attracted demand in various parts of the world. Similarly, HP Company, which shifted its offices to China, also faced high levels of laptops demands at the international market (Trebilcock and Howse, 2013). b) Discuss two reasons why in your view the ever increasing growth in international trade has negative implications for the environment. Increased Global Trade May Lead to Overexploitation of the Environmental Resources Increasing levels of the international trade is likely to lead to overexploitation of the environmental resources. This is due to the fact that finished goods are normally made available to a market via manufacturing or processing of raw materials. For instance, an increased demand of a certain country’s furniture may lead to the exploitation of an environment by increased levels of cutting down trees. In addition, good prices at the international market may also encourage the exploitation of an environment in an attempt to produce as many desired products as possible. The exploitation of an environment is also associated with the mining of minerals. For instance, the mining of gold in South Africa have resulted in negative effects, including death, as a result of creating holes and troughs under the ground. It can be argued that increased levels of demand and fair prices at the global market may lead to an environmental degradation. This is normally attributed to the fact that international businesses and individuals would be tempted to exploit the natural resources to experience unprecedented profits available at the global market. The Failure of Governments to Formulate Effective Environmental Policies and Regulations to protect their Internal Economy In a number of countries, there have been tendencies of failing to establish policies that may control the degradation of an environment. Countries that are leading in terms of oil productions are facing high levels of an environmental degradation. Although the production of oil in the world leads to negative impacts, especially the global warming, many nations are still dragging with respect to formulating policies that may enhance the protection of an environment. Presently, there have been concerns about nations such as United Emirates, Iraq and Iran with regards to the national regulations and policies which may see oil companies uphold methods of oil productions that would protect the environment. In a large number of circumstances, countries that rely on businesses that are associated with high levels of negative impacts on an environment have not played a major role in formulating laws that would protect an environment. Majorly, governments believe that formulating restrictive environmental policies may result in the decline of a Gross National Product (Nicita, 2013). Question 2 a) Reasons Why Free Trade Is Increasingly Unpopular In Most Countries Threats of Foreign Products A number of countries express the threat of other countries products. In a large number of circumstances, countries believe that if foreign products are cheap, the domestic products are likely to lose both local and internal market to other global businesses. As a result, the local companies are likely to be shut down; this normally coerces governments to formulate policies that hinder participation in a free trade. Besides low priced foreign products, governments also attempt to protect the local market from poor quality products. This has resulted in unpopularity among many nations joining the free regional and global trade (Trebilcock and Howse, 2013). The Efforts of Improving the Domestic Market and Economy A number of countries believe that the domestic market should not be freely allowed to participate in a free trade due to the fact that a liberal market may halt the efforts of improving the domestic economy. In many circumstances, a government would attempt to raise taxes with respect to foreign products to ensure that the local products gain popularity locally as a result of cheap and affordable prices. The efforts of various governments to improve the local market have seen a number of countries avoid participating in a free trade. The Need by Governments to Benefit from Taxation of Foreign Products Most often, governments opt to not engage in a free trade due to diverse setbacks associated with it. For instance, a free trade is likely to reduce the revenues that a government earns from the taxation of import and export products. A number of nations, especially those facing low levels of Gross National Product, prefer avoiding participating in a free trade to engaging in it; this is mostly because a free trade reduces the revenues a government earns for various national developments. b). Three Methods Frequently Adopted By Government to Restrict Free Trade Tariff A tariff is generally a tax that is usually charged on foreign goods and services. The intention of imposing tariffs on imported products is to increase the prices of the foreign goods. This enables the local producers of related products to sell at similar high prices. On the other hand, a government normally benefits from the collected revenues with respect to the taxation of imported products. However, it should be noted that there are three types of revenues: protective and revenue tariffs. A protective tariff is normally used by a government to protect the domestic products from facing a stiff competition initiated by foreign products. Conversely, a revenue tariff is employed by governments in an attempt to raise adequate money for various government activities. Both types of tariffs restrict a free trade. Quota This is a policy that regulates the volume of goods that can be imported. If a government imposes a quota, there is likelihood that a country would import less foreign products than required. As a result, the local buyers would be coerced to purchase the domestic products. Quotas are normally implied within a given period, such as one year. The quota policy is also imposed on individual businesses. Generally, the quota policies ensure that the local market is not threatened by the supply of imported products to a national market. Setting Certain Standards Standards refer to policies and regulations which attempt to regulate the flow of foreign goods to a local market. Various standards with respect to safety and health aspects are normally set for foreign products. However, the standards set are normally higher than that of the local products. Standards are very common in many countries in the world. Governments opt to set standards with a view to ensure that the local products do not experience a stiff competition in the face of imports. Question 3 a) Describe the term of shipment and sale as indicated in the extract above Ex Works Due to the increased attacks along various sea routes, buyers are likely to shift to other shipping terms and conditions other than Ex Works. This is due to the fact that the Ex Works demands a buyer to collect purchased goods from the seller’s site. The seller is usually not concerned about the costs that are associated with risks and transportation. Due to the increasing levels of piracy along the sea routes, buyers would opt for terms and conditions that consider risks that are associated with transporting a variety of commodities. Free on Board This shipping agreement is less insecure than the Ex Works; this is due to the fact that the goods are transferred from the seller’s site to the port where they are loaded to a ship. Commonly, a seller bears the risk and costs of getting the goods on board. However, this agreement is still associated with high levels of risks since the buyer is expected to shoulder the freight charges and other direct costs. In this regard, a buyer is highly likely to be affected by piracy fees and looting in case of an attack. As a result, this agreement is not desirable among buyers in the face of the piracy activities. Cost, Insurance and Freight This agreement, which occurs between a buyer and seller, is likely to gain popularity due to the fact that a seller bears all the costs and risk until the goods arrives at the port of a purchaser. This denotes that a seller would shoulder the risks and costs relating to the transporting of given goods. Although buyers are likely to embrace this shipping agreement, sellers are more likely than not to opt for Free on Board and Ex Works’ terms and conditions in the face of increasing levels of piracy. Direct Duties Paid This term and condition is common among the courier companies. This term and condition denotes that a seller is responsible for all costs associated with transporting goods to the buyer’s agreed place. Normally, purchasers request the goods to be transported to the buyer’s premises. A seller usually pays the taxes and duties relating to the transported products. Due to the increasing threats and actual attacks reported along various routes in the sea, buyers are likely to embrace this term and condition with respect to importation of products. However, sellers perceive that the high levels of piracy would coerce them to charge high prices (Gandolfo, 2013). a) Assess the distribution of responsibilities and risks associated with Direct Duty Paid (DDP), Ex Works (EXWKS), Free on Board (FOB) and Cost Insurance and Freight (CIF) Direct Duty Paid The responsibilities and risks relating to transportation and taxation are totally transferred to a seller as far as the terms and conditions of the Direct Duty Paid are concerned. The risks and responsibilities that a seller bears include the transportation of goods to the seller’s sea-port. It also includes the costs and risks of getting the goods on board. Unlike an assorted number of shipping terms and conditions, a seller bears the costs of transporting the goods to the buyer’s sea-port, and, finally, the premises of the purchaser. This implies that a seller is also responsible for bearing any risks that may arise while shipping the goods to the purchaser’s premises. In the face of the current piracy activities along various sea routes, a seller is expected to bear any losses that may occur as a result of an attack. Besides the bearing of the transportation’s costs and risks whilst shipping goods between the seller’s and buyer’s premises, a manufacturer is required to pay the taxes that are associated with the goods. This denotes that all responsibilities and risks are shifted to a seller. In this regard, a buyer is only concerned about paying for the goods. Ex Works With respect to the Ex Works’ terms and conditions, a buyer bears the entire costs of transportation and related risks. This is because a buyer is expected to collect the goods from the seller’s premises. A buyer is responsible for getting purchased goods on board, as well as the payment of freight charges. In addition, a buyer should bear all the risks of transporting goods along the sea-route. Such risks may include an attack, leakage, sinking of a ship or spoiling of products. All these risks are normally born by a buyer; although buyers are likely to purchase goods at a relative cheap price, the high levels of risks pose a great danger of incurring high losses. Generally, a seller is saved from various risks of transporting goods since all the risks and responsibilities are shifted to a buyer once the payments for goods have been done at the seller’s premises. Free on Board As far as the terms and conditions of the Free on Board are concerned, seller partly bears the risks and costs of transportation. However, a buyer bears a large part of the costs and risks relating to the transportation of goods. A seller only ensures that the goods are transported from the manufacturing site to the port, where they are loaded to a ship; a seller normally bears the risks and costs of getting goods on board. Once the goods have been loaded to a ship at the seller’s port, a buyer is expected to bear all the costs and risks relating to the transportation of goods to the required location. In this case, a buyer bears a high level of risk as far as the transportation of goods are concerned; the risks likely to be experienced include attacks, leakage, increases in taxation and sea-accidents among others. Although a seller bears a part of the costs and risks, a buyer shoulders a great percentage of the expenses and sea-perils. Cost, Insurance and Freight This shipping terms and conditions ensure that a seller bears a large of the costs and risks of transporting certain products. A buyer is responsible for a small part of the costs and risks relating to the shipment of goods from the seller’s site. In particular, a seller bears the responsibility and risk of transporting goods to the buyer’s port. At this point, the responsibilities and risks of transporting the goods to the intended locality are shifted to a buyer. In addition, a buyer also bears the responsibility of paying for taxes. This shipping agreement implies that a seller bears a high level of sea-risks, such as that of piracy among others. List of references Gandolfo, G., 2013. International trade theory and policy. New York: Routledge. Nicita, A., 2013. Exchange rates, international trade and trade policies. International Economics, 135(136), pp.47-61. Saslavsky, D. and Shepherd, B., 2013. Facilitating international production networks: The role of trade logistics. The Journal of International Trade & Economic Development, 9(4), pp.1- 21. Trebilcock, M. and Howse, R., 2013. The regulation of international trade. Abingdon, Oxon: Routledge. Read More