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International Trade - World Trade - Essay Example

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1. As reported by the World Trade Organisation in 2005, world trade in merchandise grew at an average of 7 percent per year between 1955 and 2004. Identify and critically discuss four factors that may have contributed to this over this period. 30% (600 WORDS)
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Download file to see previous pages The first factor, the rapid advancement in information technology, which linked nations through its borderless information highways through its continuing advances and dynamism, played an important role in bridging the gap in the international trade system, primarily in the standardization of the import and export trade, in the implementation of international payment system, and in the effective use of B2B processes for most of the essential operations of the trade such as custom declaration and billing. The internet effectively made possible the electronic payment system, thus facilitating convenient and reliable international payment transactions using credit card. Other logistic processes have also been efficiently facilitated through the internet. With this convenience, many key players in world trade were encouraged to join, as well as new entrants found ease in joining the trade.
Second factor has been the reduction or, in some parts of the world, elimination, of trade barriers such as tariffs. This had been attributed as a result of the series of trade negotiations on tariff reductions, as brought about by the General Agreement on Tariffs and Trade (GATT). This factor has been regarded as one of the most significant among those that contributed to the increase in international trade during the period 1955 - 2004. Tariff, which is basically the tax levied on goods crossing national boundaries, when reduced or eliminated, encourage traders across the globe, thus a more vigorous exchange of goods and commodities among countries.
The third factor that may have contributed to such trade increase was the significant decline in international transportation costs (Hummels, D., 2007). This can be seen through historical evidences prepared by economic hirtorians and experts. For instance, sufficient documentation of the significant reductions in shipping costs from 1850 - 1913 are available (Harley, 1980, 1988, 1989; North, 1958, 1968; Mohammed and Williamson, 2004; as cited by Hummels, D., 2001). Further, reliable econometric evidences have subsequently connected the decline in shipping costs with the rapid trade growth within the first era of globalization (Estevadeordal et al, 2003 as cited by Hummels, D., 2007). Technological advances in transportation decades after World War II, like the development of jet aircraft engines and the adoption of the use of containers in ocean shipping, have also significant effect on this. Air shipping grew rapidly during this period due to rising demand and more advanced technologies that it adopted. Likewise, the ocean shipping industry had similar trend, but grew more through the economies of scale as a critical result of the growing trade among nations. New ports have been opened, and new industry entrants provided a dynamic interaction within the industry.
Last factor I would mention here would be the rising cost of income during that period. With the critical inputs contributing to the increase in trade during the period, subsequent effects have gone down to the consumers as well. For instance, the reduction of prices of consumer goods due to decreased tariffs as well as shipping costs ...Download file to see next pagesRead More
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