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The world trade pattern has never been the same as it used to be 100 years ago. Back to the past, it is the world that the most developed countries would have the voice in many important decisions, global economy policies, political issues of other countries, for instances. Fifteen years have passed since the entry into force of the Marrakesh Agreement Establishing the World Trade Organization (WTO). During this time, the traditional actors – namely, the United States, Japan, the European Union and Canada (the original Quad) – have retained much of their leading role on the economic and political scene. While their influence on world affairs is irrefutable, over the years, their dominance has waned. Since 1995, the world has undergone major geopolitical changes and has witnessed the rise of new state actors, who have asserted their own role in shaping the world's economic and political environment. Today, developing countries constitute two thirds of the WTO's membership. The rise in numbers and significance of non-state actors (NSAs) has also confirmed their role in shaping the world's economic and political environment. It is partly to admit, which many people may tell you, the growth of developing economies and the globalization trend have transformed the word trade sharply. However, that is not the whole story while there are more. This assignment will bring you a new point of view about what help shape the world trade pattern, how those factors affect it and some predictions of the writers about the future of the global trade.
The world economy is currently striving to recover from its deepest economic crisis since the 1930s. The crisis led to an unprecedented contraction in trade flows that stands in contrast to the process of economic integration and the significant expansion of trade experienced since the Second World War. This expansion was partly driven by the process of globalization that rested on increased economic inter-dependence among nations, which was stimulated by a combination of technological advances, economic policy reforms, and geopolitical changes. The new geopolitical environment, as well as the financial crisis, are factors that have affected international trade in different ways. The development of new technologies has also contributed towards shaping international trade by changing the way business is conducted and the way people interact. The rapid development of technology has generated both new challenges and new opportunities for economic agents worldwide. What are the main economic, political and technological factors shaping world trade? There are, definitely, enormous works of thousands of economists in the world considering about this topic. Understanding well what factors are determining world trade may help not only them but policy makers, businessmen… to make the right decision to earn profit and gain from world trade. This assignment cannot cover all potential forces affecting the shaping of world trade. It only looks at three major elements contributing to the transformation of the world trade, especially in last decade. For more specifically, the paper progressively introduces the following sections: • Section 1 provides a broad context for the analysis with some discussion of the
theory of international trade; • Section 2 mainly describes the economical factors, namely Preferential Trade
Agreements, Global production networks, Growth of developing countries
Section 3 concentrates on how the development of Internet, International Payment
System and Transportation, called Technological factors, influences that of World trade. • Section 4 illustrates the impacts of Globalization trend, WTO and local policies by
analyzing some situations and decisions that shape the global trade.
Mercantilism 2. The absolute advantage 3. International transportation III. Factor proportions theory II. New theories of international trade Chapter 2: Analyzing factors affecting the world trade pattern I. Local policies 2. Global production networks 3. Technological factors 1.TABLE OF CONTENTS Abstract Introduction Chapter 1: Overview of theories of international trade I. Classical theories of international trade 1. Economical factors 1. Internet 2. Preferential trade agreements 2. International payment system 3. The comparative advantage 4. Forecast about the future of world trade pattern Conclusion Reference Duty chart 5 5 5 5 6 6 7 12 12 12 15 17 20 20 21 23 26 26 27 29 30 . Growth of developing countries II. Political factors 1. Globalization trend and World Organization's influences IV.
this tendency. It superseded the medieval feudal organization in Western Europe. Belgium. Production was carefully regulated with the object of securing goods of high quality and low cost. The state exercised much control over economic life. United Kingdom. Geographical discoveries not only stimulated the international trade. The standard of living is weaker. The base of this theory was the “commercial revolution”. The theory was criticized by the newly appeared class. More money was associated with less products and inflation. . Mercantilism was the economic system of the major trading nations during the 16th. especially in Holland. but also produced an affluent flow of gold and silver. which could be used to encourage the economy based on money and prices. Portugal and Spain. Thomas Mun and Antoine de Montchrétien model) Mercantilism is a philosophy from about 300 years ago. The theory states that the world only contained a fixed amount of wealth and that to increase a country wealth. the transition from local economies to national economies. chiefly through corporations and trading companies. from a rudimentary trade to a larger international trade. thus enabling the nation to hold its place in foreign markets. one country had to take some wealth from another.CHAPTER 1: OVERVIEW OF THEORIES OF INTERNATIONAL TRADE • Classical theories of international trade • Mercantilism (William Petty. and 18th century. France. from feudalism to capitalism. 17th. either through having a higher import/export ratio. to export more and import less and to receive in exchange gold (the deficit is paid in gold) is called MERCANTILISM. Mercantilist ideas did not decline until the coming of the Industrial Revolution and of laissez-faire. based on the premise that national wealth and power were best served by increasing exports and collecting precious metals in return. So. Their policy was to export in the countries that they controlled and not to import (to have a positive Balance of Trade). The monarch controlled everything.
Adam Smith analyzed for the beginning country A. He used a unifactorial system of economy. is to determine the value of goods by measuring the labour incorporated in them. Symbolizing H-hours. L-labour. internal or external.• The Absolute Advantage (Adam Smith model) In the second half of the XVIII century. In order to demonstrate its theory. Adam Smith’s theory starts with the idea that export is profitable if you can import goods that could satisfy better the necessities of consumers instead of producing them on the internal market. that the mercantilist policies favorised producers and disadvantaged the interests of consumers. mercantilist policies became an obstacle for the economic progress. Adam Smith (father of liberalism and economical science) brought the argument in his book “The Wealth of Nations”. using one factor of production. existing in this case renounce of trade. Because all the economies have limited resources. the unitary necessary of labour for product X is HLX and for Y HLY. and if a country wants to produce much of one product it has to give up producing another goods. there are limits in the level of production. Renounces can be illustrated by a graphic. published in 1776. • The Comparative Advantage (David Ricardo model) David Ricardo theory demonstrates that countries can gain from trade even if one of them is less productive then another to all goods that it produce Country A is more productive in X than in Y Country B is more productive in Y than in X . The essence of Adam Smith theory is that the rule that leads the exchanges from any market. the productivity of labour. evaluated in the necessary of hours needed to produce a unit of measure of the products X and Y.
Multiple production methods presents a difficulty for the Heckscher-Ohlin theory. For example. and that firms and governments could act strategically to affect trade flows and national welfare. Respectable academic economists began asking whether unconditional free trade was a country’s best policy choice. this growing body of literature represented a radical departure from previous scholarship. Basically. This case reviews the background and central hypotheses of these “new” theories. Clearly. II) New theories of international trade A new body of international trade theory emerged in the 1980s. in this case that the Heckscher-Ohlin theory erroneously assumes that the factors of production are homogeneous. An example is a capital intensive country exporting laborintensive goods. on this view the relative scarcity of a factor or of factors determines the comparative advantage of the country. . The case looks at why many economists and policymakers thought alternative approaches were necessary. and capital. • Factor proportions theory A country should choose what to produce on the basis of the relative scarcity of labor. Changes in the trading environment. wheat can be produced in at least two ways. Rigorous mathematical models were developed which questioned the heart and soul of classical comparative advantage.There are instances of reversal of this common sense. The use of different production methods rests on the heterogeneity of factors of production. The reaction is to save the theory by pointing out a possible weakness. Leontief Paradox . at what the contributions of industrial organization to this new theory were. The case ends with a questions about the value of classical comparative advantage and the role of firm and industry-level variables in determining who competes successfully in international trade. The foundations of this theory were that competition in markets was imperfect. which have also been called theories of strategic trade policy. recently Canada and Egypt were net exporters of wheat. each country should specialize in the production for which it has less opportunity cost. and at what some of the tentative results in the 1980s were. land. For many economists.Then.
But as industries became increasingly concentrated. Classical theory assumed that firms did not have the power to affect prices. government policymakers found that policies for such diverse activities as antitrust or innovation could no longer be set in isolation from the world economy. especially the increasing importance of trade for the United States.S.Several economic changes in the international trading system stimulated executives. The rapid growth of imports into the United States. at the same time. telecommunications. for instance. industries continued lobbying for more seek government assistance. Mature protection while normally free traders. all firms could be assumed to be price takers. to revisit international trade theory in the 1980s. some governments had demonstrated an ability to affect the welfare of Americans through policy actions. especially in Europe and North America. government should counter such assistance through its own initiatives. and airframe firms. A second stimulus to the new trade theory was shifting political and policy dynamics. For the first time. meant that trade suddenly became a primary concern for executives and policymakers alike. firms and governments had the opportunity to make strategic choices that could build competitive advantage in global markets. Demand for government intervention. with large firms capable of affecting the structure and conduct of the market. and the growth of very large firms (usually multinationals) which dominated selected global markets. actively started to . led economists and politicians to search for solutions as well as justifications for their preferred policies. Moreover. The first was growing economic interdependence among nations. theory did not have to account for strategic behavior.S. Rising demands for protectionism and growing pressures for regional trade blocs. By the 1980s. policymakers. Traditional predictions of trade patterns were further confounded by the emergence of huge scale economies in some industries. U. such as semiconductors. As long as there were many firms operating at arm’s length. virtually all American companies began facing serious foreign competition at home. the possibility that foreign governments were providing assistance to their domestically-based firms raised the question of whether the U.
R&D races and technological spillovers. theories such as the product life cycle. the roots of these theories can be traced back 150 years to when profits were available These types of behavior were referred to as strategic because firms could consciously undertake them to capture control of markets and could anticipate the reactions of rivals to their actions. economies of scope. While some economists had questioned classical trade theory for many years. Origins of the New Trade Theory: Industrial Organization While theories of trade under imperfect competition are a phenomenon of the 1980s. (moving before rivals to capture competitive advantage). preemption in R&D. As a result. Crossing Over From Industrial Organization to International Trade An iconoclastic handful of trade theorists realized that there were reasons to be concerned with firms and market imperfections and behave with strategic behavior in the in international arena. Among the types of strategic behavior firms could engage in were dumping (selling in markets below cost to develop economies of scale). and thereby affect a country’s balance of trade and . learning effects. product introduction. market penetration. we might better understand the new patterns of international flows. and predation (incurring losses from price cutting to drive rivals out of the marketplace). A few economists began to speculate that if these models of imperfect competition could be applied to international trade. they were never able to provide rigorous alternatives. which incorporated ideas about imperfect competition.New analytical tools. etc. These tools could explain why it was sometimes beneficial for firms to engage in certain activities that otherwise did not seem feasible or rational. Industrial organization theorists had developed new tools for analyzing economies of scale. remained outside the mainstream of academic economics. The central proposition of the new trade theorists was that in strategically self-conscious ways industrial organization (IO) first began describing how firms might behave when excess governments could imperfect global markets.
The result would be increased market shares and profits for the domestic firms. which reduced their usefulness for prescribing policy. Governments could use tax relief or subsidies. However. economists turned to empirical research. to increase the profitability of private investments. economists believed that governments could help domestic firms to capture profits that would otherwise accrue to foreign firms. Even if the theory was refined sufficiently. Third. A second concern was that few believed the models captured enough of the key elements of real-world behavior to provide a satisfactory guide to decision making. Even when data was available there was a great deal of uncertainty about its veracity. it was unlikely that frontline policy analysts would have the time and resources necessary to build models of sufficient sophistication.The profit-shifting argument was built on the assumption that a domestic government seeks to maximize national welfare. Implications for Trade Policy These empirical limitations of the new trade was that theory left theorists cautious about its application to real-world problems. mathematical formulations. Empirical Research By developing clear. Mistaken estimates could lead to misguided policies. Research on trade under imperfect competition faced daunting obstacles such as the lack of data. for example. To sort out which models were more or less robust. As a result. and not the welfare of the world or foreign consumers and producers. foreign firms might be discouraged from expanding their own operations. the sensitivity of the models to assumptions about the . What concerned economists most governments generally lacked sources of unbiased data upon which to base their decisions. Based on the new trade theory. the new trade theorists gave strategic trade policy academic respectability. If government policy facilitated domestically-based firms to make a credible commitment to expand production facilities. theorists mixed modeling techniques and relied on educated guesswork to set missing parameters. the models remained very tightly tied to narrow and unrealistic sets of assumptions.
the complexity of the modelling could have made the policy process less transparent and. more difficult to monitor for fairness. therefore. change. consequences of considered the to induce cooperation as the And fourth. some bases for national competitive advantage were more sustainable than others. cooperative strategies avoided the potentially severe miscalculating the foreign response to a noncooperative move. Implications for Government Policy Porter based his prescriptions for government policy on a number of premises that differed from nations. which the creates standard economic policies analyses. not over oneor two-year business cycles. Finally. Second. based on a long planning horizon. discouraged from Governments were sustaining national advantage demanded continuous innovation and governments were discouraged from resorting to policies that conveyed shortterm. as in the aircraft example. Moreover. Third. national competitive advantage was created over decades. Thus. superior product differentiation. competitive opportunities and pressures for continued innovations. Fourth. the most beneficial government policies were the slow and patient ones. Thus. Conditional strategies which offered the carrot of liberalized trade most likely backed up by the stick of retaliation were foreign response. a nation’s . cooperative” trade initiatives. Given these hesitations.term economic fluctuations. Unconditional cooperative strategies (such as “the U. could also trigger an R&D subsidy war rather than preclude entry. and unserved market segments. R&D investment that was intended to be preemptive. will always support free trade regardless of the behavior of other countries”) invited foreign governments to take a “free ride” at America’s expense. since firms competed.S. governments were advised to encourage the development of specialized and advanced factors of production. As a consequence. not on short. First. not of governments should be set to encourage an environment undertaking direct interventions. static advantages because they undermined innovation and dynamism. some new trade theorists concluded that governments would be wisest to follow a rule of “conditional.reactions of foreign firms and governments reduced the confidence of policymakers and academics in making prescriptions.
While no definitive theory of international trade had yet emerged by the late 1980s. particularly for manufactured goods traded among industrialized countries. Michael Porter chose an inductive approach and built a complex framework for analyzing the competitiveness of nations. inadequate data continued to plague the field. the decade produced significant advancement into new ideas and promising areas of research. Despite a growing number of empirical studies. Summary By the end of the 1980s. relatively few scholars or practitioners accepted the theory of factor proportions and comparative advantage as an adequate explanation of the observed patterns of trade. CHAPTER 2: ANALYZING FACTORS AFFECTING THE WORLD TRADE PATTERN • • • Economical factors Preferential Trade Agreements Overview about preferential trade agreements . Academic research continued on work towards identifying the exceptions to this rule. In contrast to the trade theorists’ research. Trade economists developed a new set of theoretical tools for examining trade under imperfect competition and produced an eclectic basket of models. To provide a new explanation. two very different types of research were undertaken.firms and work force could not be relied upon to understand their own longterm self interest. Perhaps the only certain trade had fallen from being policy conclusion was that free considered an unequivocally superior policy to or desires of their being the preferred policy of economists in an imperfect world. This meant that governments were encouraged to choose their policies without undue regard for the immediate comfort constituents.
Consider a world composed of three identical countries called Home. Each country imports two goods from the other two .Preferential Trade Agreements (PTAs) are agreements among a set of countries involving preferential treatment of bilateral trade between any two parties to the agreement relative to their trade with the rest of the world. Types of Trade Agreements • • • • • Financial Pact Free Trade Agreement Single External Tariff Common Market Monetary Areas • An overview of the economic effects of PTAs The basic economic effects of preferential agreements can be illustrated in a simple model (Baldwin. 2009). Partner and Rest of the World (RoW).
1 below. while the border price faced by exporters in RoW is lower. the following price and volume effects take place. but now there are two distinct border prices. The domestic price falls relative to the situation where there is a single MFN tariff as the supply of the good in the Home economy is increased. Importantly. and Home producers get duty free access in the Partner market Focusing first on the market for good 1. so that Partner producers get duty-free access in the Home market. consider the case where Home and Partner form a free trade area (or a customs union). and exports one good to both destinations. however. . as they still face a tariff but the domestic price in the Home economy is lower. What are the effects of a preferential trade agreement? To help answer this question. The trade patterns of this model economy are depicted in Figure C. the two suppliers share equally the reduction in exports due to the imposition of an MFN tariff.Favoured Nation (MFN) tariff. all countries impose on each other the same (non-discriminatory) tariff. referred to as the Most. The border price faced by Partner is higher. exports from Partner expand. the domestic price is higher than the border price faced by the two suppliers and imports are lower compared to open trade.nations. As a result. while exports from RoW contract. In this scenario. Further assume that in an initial situation. as exporters no longer face a tariff in the Home market. the good that is imported by the Home economy.
The only difference. The formation of the PTA has offsetting volume and price effects. these exporters also benefit from the fact that tariff discrimination reduces imports from RoW. The terms of trade (i. RoW suffers a reduction of its exports to the PTA member countries. where the Home economy is the importer (the effects on Partner for good 2 are analogous).e. Home gains from a higher border price and greater exports to Partner. the formation of a preferential arrangement has no effect on the market for good 3. the effects discussed above on the market for good 1 materialize symmetrically for good 2. in this market. Consider the market for good 1. In other words. As discussed above. the non-member is hurt by a negative terms-of-trade effect. The increased imports allow the Home economy to benefit from the replacement of high-cost domestic production with more efficient imports. In addition. as it would not exist if tariff liberalization were carried out in a non-discriminatory fashion. exporters in member countries gain from improved market access as the tariff is removed. while Partner is the importer. A PTA has two types of effects on the export side. to what extent the demand and supply of a product is sensitive to changes in its price).As the PTA is reciprocal. as that country is assumed to maintain the same MFN tariff.e. a preferential agreement can be interpreted as a negative externality that PTA members impose on nonmembers. while RoW loses from the drop in border price and the reduction in its exports in sector 2. Therefore. whether the members of a PTA gain or lose depends on the level of the initial MFN tariff and on the elasticities of demand and supply (i. Trade creation and trade diversion . Secondly. the preferential agreement has ambiguous effects on member countries. as the price of its exports declines while the prices of its imports are unaltered. Finally. First. is that in this market the Home economy is an exporter. intuitively. Overall. the price of exports relative to imports) of Home improve relative to RoW and falls relative to Partner. The latter effect is sometimes referred to as the “preference rent”. A final consideration relates to the welfare effect of a PTA on non-members. On the import side. where RoW is the importer.
This phenomenon has important implications for trade flows. involving increased trade in parts and components. The process is especially complex because while the latter are essentially territorially specific (primarily. imports from partners replace imports from more efficient outside producers and the member countries end up paying more for the same good. As tariffs on trade between partners fall. In recent years there has been important development of production networks as firms outsource parts of their production to lower wage locations. regional and local economic and social dimensions of the processes involved in many (though by no means all) forms of economic globalization. at the level of the nation-state) the production networks themselves are not. Such networks not only integrate firms (and parts of firms) into structures which blur traditional organizational boundaries – through the development of diverse forms of equity and non-equity relationships – but also integrate national economies (or parts of such economies) in ways which have enormous implications for their well-being. At the same time. influenced in part by regulatory and nonregulatory barriers and local socio-cultural conditions. some domestic production is replaced by imports from more efficient producers from partners – thus resulting in trade creation and welfare gains. • Global production networks The global production network is a conceptual framework that is capable of grasping the global. . preferential liberalization has two main effects – trade creation and trade diversion – and the net balance between the two determines whether a PTA increases welfare for its members. They ‘cut through’ state boundaries in highly differentiated ways. distributed and consumed – have become both organizationally more complex and also increasingly global in their geographic extent. Production networks – the nexus of interconnected functions and operations through which goods and services are produced. This second effect which harms members' welfare is known as trade diversion. the precise nature and articulation of firm-centred production networks are deeply influenced by the concrete socio-political contexts within which they are embedded. to create structures which are ‘discontinuously territorial’. though not exclusively. But since the PTA also discriminates against non-members.In this theory.
Ng and Yeats (1999) and Kaminski and Ng (2001) find similar results for Eastern and Central Europe and East Asia. The role of imported intermediate inputs was also analysed by these authors. still accounting for a large share of world trade. They find a growth in vertical specialization between 1970 and 1990 for ten OECD countries and four emerging market countries. Ishii and Yi (2001). Yeats (2001) shows that. for the OECD countries. This distinction can be applied to a subset of products. Hummels. use input-output tables to estimate the degree of ‘vertical specialization’ of international trade. the fragmentation of production by MNEs (Multinational Enterprises) has been documented focusing on parent-affiliates relationships and intra-firm trade. as location may be very sensitive to small trade frictions. the phenomenon has been measured adopting very different indicators. Japan. Intra-firm trade covers a large share of total exports of US (45%). Moreover. we turn to the role of international production networks in encouraging the establishment of “deep” PTAs that go beyond reducing tariffs. that is the use of imported inputs in producing goods that are exported. Yeats (2001). Ng and Yeats (1999) and Kaminski and Ng (2001) use foreign trade statistics that classify goods in parts and components (a subset of intermediate goods) and finished products. trade in parts and components has been growing faster than total trade over 1976-1996 and that it now accounts for around 30% of OECD trade. The econometric results show that greater trade in parts and components is associated with the greater depth of . Finally. a large share of exports from US and Swedish parents to their subsidiaries is made of parts and components for further reprocessing. the United Kingdom and the US estimates the imported intermediate inputs used in production.and for trade policy. a number of studies measure international fragmentation of production taking place among independent firms acting as a network. Second. Japanese (30%) and Swedish (50%) parent companies. First. One approach applied by Feenstra and Hanson (1999) for the US and by Campa and Goldberg (1997) for Canada. mostly machinery and equipment (SITC 7 and 8 categories). Due to the variety of forms in which international fragmentation of production can take place. In this section. Also in this case the share of imported inputs is large and rising.
the analysis shows that the greater the depth of an agreement. This figure reveals the dramatic nature of the transformation in the commodity specialization of developing country. the composition of developing country exports has changed in fundamental ways. • Growth of developing countries The changes in trade policies and the reductions in trade barriers that have occurred in recent years have been associated with major changes in developing countries’ role in the world economy. In particular. Since the 1980s. countries already involved in the international fragmentation of production are willing to sign preferential trade agreements with their partners in order to secure their trading relationships as providers of intermediate goods and services. In details. the bigger the increase in trade among PTA members. and increased their reliance on exports to other developing countries. we would mention the changes in export pattern of selected groups of relatively commodity-dependent economies. The theoretical literature on PTAs suggests that the relationship between deep integration and trade goes in both directions. PTAs may stimulate the creation of production networks by facilitating trade among potential members of a supply chain.newly signed agreements among PTA members. In addition. . On the other hand. developing countries have drastically increased their reliance on manufactures exports. Figure 1 shows the changes that have occurred in the pattern of merchandise exports from developing countries as a group over the period from 1965 to 1998. over the period in which developing countries have been reducing their trade barriers. exports of services have become much more important for developing countries. On the one hand. Further.
including growth in the share of developing countries in world trade. the shares of agricultural and mineral products exported to other developing countries have risen substantially over time. . and the liberalization of the developing country trade. As is shown in Figure 2.Along with the changes in the commodity composition of exports have come substantial changes in the direction of exports. This increase in the importance of developing countries as markets for each others’ goods reflects a number of factors.
Figure 3 presents data on the shares of commercial5 services in exports of goods and services from major country groups. .Another important change in the pattern of world trade has been a substantial increase in the importance of services trade.
The first is a rapid increase in the importance of manufactures exports from developing countries. The second is a marked shift in the direction of developing country exports towards other developing countries. and diminishes the concerns about potential price declines as exports expand (Martin 1993b). This diversification of exports and shift away from commodities has many important advantages. it helps reduce the volatility of export returns.In summarized. The third is a sharp increase in the importance of services exports from developing countries. In particular.. these changes mean that there has been a fundamental shift away from the traditional north-south model of the world economy in which developing countries exporting commodities in return for imports of manufactures. Together. • Technological factors • Internet . the developing country export patterns enjoyed three striking changes through brief survey of patterns of trade before.
Although Internet came out in the 1960s. and instantaneous flow of information is seen as a critical factor in developing trading relationships.2 percentage point increase in export growth. there are 6 countries which are developing countries. Probably. nowadays. In additional. it is undoubtedly that Internet has proved its motive role in world trade pattern. costless. The free. Figure 4 shows that out of 20 countries with highest number of internet users. one result suggests that a 10 percentage point increase in the growth of web hosts in a country leads to about a 0. people has become familiar with two kinds of trade known as e-business and traditional business. It is generally believed that commercial use of the Internet has been a significant stimulant to the development of international trade. Thus. as you may know that probably almost young milionares over the world today are businessmen in terms of technology-related field. . It also indicates the potential development of these countries. and lead to a rapid change in the way people trade in a country or even across national borders..
All payment methods carry a certain degree of risk. Negotiating the payment method is equally as important as negotiating the additional aspects of transaction such as quantity. They buyer can accept of reject the goods or services during this period. The buyer and seller participate in online negotiations over a particular material or service. shipping method. shipping method of whether or not it is a recurring transaction. These finalized details would be passed to the Escrow service. the buyer then has a set number of days to inspect the merchandise as was previously set – out in the purchase order. Since the advent of the Internet. If the buyer rejects the merchandise. The risk to participants is lessened in comparison to using a method such as a wire transfer. are available to companies for a free which is normally based as a percentage cost of the overall transaction value. On arrival. the main risk in relation to escrow services is the fake escrow websites. the increase of emarketplaces since the start of 21st century there have been a number of methods adopted in relation to payment methods using online marketplaces.com. If they accept the seller is paid by the escrow service and transaction is concluded.• International Payment System Payment is an integral part of mercantile process. Alipay. quantity. for example. it is the escrow service who notifies the seller to ship the goods or services to the buyer. and it is only by carrying out accurate due diligence on a potential business partner do you alleviate some of that risk to your company. price. An escrow service. and in particular.escrow. One of the most widely available payment methods for participants in emarketplaces is that of escrow services. and Alibaba’s China-based escrow services. the buyer returns the goods to the seller and payment is returned to the buyer by the escrow service. operates essentially as follows. Currently. in relation to an emarketplace. buyer’s inspection period. Escrow services such as www. After negotiation the participants finalize the transaction online: normally agreeing on a purchase order which would detail fields such as price. proliferation of . The buyer issues payment for merchandise to the escrow service – once payment is confirming by the escrow service.
as the next generation of business leaders will be much more comfortable in using the various ebusiness solutions offered on the Internet. selection of an appropriate payment method whilst using an e-marketplace will be an easier task. Additional payment methods such as wire transfer. Economic development in Pacific Asia and in China in particular has been the dominant factor behind the growth of international transportation in recent years. they also include a high degree of risk. and other online payment sites such as 2checkout. However. unless it’s a particularly large transaction. the transaction itself becomes economically unviable. and payment using credit cards are also available to SMEs. • International Transportation The growth of the amount of freight being traded as well as a great variety of origins and destinations promotes the importance of international transportation as a fundamental element supporting the global economy. however. Once the fee is factored-in to the profit on the transaction. Since the trading distances involved are often considerable. SMEs may engage in more high risk payment methods in order to sustain a potential higher profit. are prominent alternatives used for making online payments. in relation to emarketplaces. As all payment methods carry a degree of risk. This trend may change in future years. it would appear that SMEs prefer to meet. this has resulted in increasing demands on the maritime shipping industry and on port activities. China is importing growing quantities of raw materials and energy and exporting growing quantities of manufactured goods. Paypal. negotiate and conclude business using the more traditional payment methods that were outlined. Therefore. however. The outcome has been a surge in demands for long distance . As its industrial and manufacturing activities develop. currently.From experience. particularly from a buyer perspective.com. After due diligence has been successfully finalized. it is imperative that appropriate due diligence is carried out on any prospective trading partner with particular focus on that trading partner’s credit worthiness. one of reasons why some SMEs (small and medium-sized enterprise) do not engage in escrow services is the additional fee charged by the escrow provider.
International trade requires distribution infrastructures that can support trade between several partners. most international freight movements involve several modes . logistics. financial and cultural setting in which international transport systems operate. • Transportation services. transportation is often referred to as an enabling factor that is not necessarily the cause of international trade. and this more quickly and more efficiently. Concerns the complex legal. Concerns physical infrastructures such as terminals. finance. International transportation systems have been under increasing pressures to support additional demands in freights volume and the distance at which this freight is being carried. About half of all global trade takes place between locations of more than 3. regulations. It includes activities such as distribution. Few other technical improvements than containerization have contributed to this environment of growing mobility of freight. Because of this geography. but as a condition without which globalization could not have occurred. Consequently. Efficiencies or deficiencies in transport infrastructures will either promote or inhibit international trade. • Transactional environment. a growing share of general cargo moving globally is containerized. It includes aspects such as exchange rates. A common development problem is the inability of international transportation infrastructures to support flows. Since containers and their intermodal transport systems improve the efficiency of global distribution. but also consumer preferences. Concerns the complex set of services involved in the international circulation of passengers and freight. quotas and tariffs. vehicles and networks.international transportation.000 km apart. undermining access to the global market and the benefits that can be derived from international trade. Three components of international transportation facilitate trade: • Transportation infrastructure. insurance and marketing. The ports in the Pearl River delta in Guangdong province now handle almost as many containers as all the ports in the United States combined. This could not have occurred without considerable technical improvements permitting to transport larger quantities of passengers and freight. political.
with containerized shipping at the forefront of the process. Freight is mainly brought to port and airport terminals by trucking or rail. two are specifically concerned with international trade: • Ports and maritime shipping.since it is impossible to have a physical continuity in freight flows. The location of freight airports correspond to high technology manufacturing clusters as well as intermediary locations where freight planes are refueled and/or cargo is transshipped. its importance in terms of the total value is much more significant. Road and railway modes tend to occupy a more marginal portion of international transportation since they are above all modes for national or regional transport services. The global maritime transport system is composed of a series of major gateways granting access to major production and consumption regions. Their importance is focused on their role in the "first and last miles" of global distribution. Although in terms tonnage air transportation carries an insignificant amount of freight (0. Thus. There are however notable exceptions in the role of overland transportation in international trade. The importance of maritime transportation in global freight trade in unmistakable. Between those gateways are major hubs acting as points of interconnection and transshipment between systems of maritime circulation. particularly in terms of tonnage as it handles about 90% of the global trade. electronics).2% of total tonnage) compared with maritime transportation. which is linked with the types of goods it transports (e. International air freight is about 70 times more valuable than its maritime counterpart and about 30 times more valuable than freight carried overland. globalization is the realm of maritime shipping. these exchanges are at priori regional by definition. United States and Mexico is supported by trucking. as well as large share of the Western European trade. A substantial share of the NAFTA trade between Canada. Transport chains must thus be established to service these flows which reinforce the importance of intermodal transportation modes and terminals at strategic locations. 15% of the value of global trade. • Airports and air transport. although intermodal transportation confers a more complex setting in the interpretation of these flows. Among the numerous transport modes.g. In spite of this. .
While the global population and its derived demand will continue to grow and reach around 9 billion by 2050. • Political factors • Local policies Figure 1 Predicted increase of world imports if all countries were democratic . mostly in terms of demographic. the expected scarcity of this fossil fuel will impose a rationalization of international trade and its underlying supply chains. but also a division between the generation of environmental externalities and the consumption of the goods related to these externalities. Environmental issues have also become more salient with the growing tendency of the public sector to regulate components of international transportation that are judged to have negative externalities. Also. will recede. particularly in developed countries. As both maritime and air freight transportation depend on petroleum. many challenges a impacting future developments in international trade and transportation. energy and environmental issues. Thus international trade has permitted a shift in the international division of production. particularly China. will transform consumption patterns as a growing share of the population shifts from wealth producing (working and saving) to wealth consuming (selling saved assets). international trade enables several countries to mask their energy consumption and pollutant emissions by importing goods that are produced elsewhere and where environmental externalities are generated. The demographic dividend in terms of peak share of working age population that many countries benefited from. the aging of the population.Still.
accounting for official trade policy We re-examine the influence of a country’s political regime on its involvement in international trade. Democratisation leads to trade liberalisation because political power falls into the hands of a median voter who is in favour of free trade .Autocratic states do trade less.Figure 2 Predicted increase of world imports if all countries were democratic. • • Globalization trend and World Organization’s influences Globalization .
Exacerbate the process of long-term economic growth. These agreements circumvent the democratic national rights of a country to determine domestic polices regarding trade. • • • • Can worsen the balance of payments. The development of the domestic market.GATS . which can inhibit the growth of the industry. where countries in the world of market forces increasingly integrated within the territorial limits without hindrance. The financial sector is increasingly unstable.It includes GATT. Can obtain more capital and better technology. Provide additional funding for economic development. World Organization The international organizations to strengthen international trade. the WTO has promoted market access for corporations with trade agreements. Since its creation. Negative impact: • Because the development of the foreign trade becomes more free. Here the world is considered as a whole in which all regions can quickly and easily affordable. Side of trade movements and inventory towards liberalization of capital so that all people are free to try any time and place in this world.Economic globalization is the life of a world economy that is open and does not recognize territorial boundaries. or land between yanglain regions with each region. The globalization of the economy requires the removal of all restrictions and barriers to capital flows of goods and services. natural resources and service provision. Economic globalization is a process of economic activity and trade. Impact of globalization on international trade Positive impact: • • • • • World production could be improved Prosperity in a country of the Community.
The International Monetary Fund was conceived in July 1944 with a goal to stabilize exchange rates and assist the reconstruction of the world’s international payment system. Its aim is to remove any restrictions and internal government regulations in the area of service delivery that can be+ considered “barriers to trade". Countries contributed to a pool which could be borrowed from. non-tariff barriers. The World Bank is one of two major institutions created as a result of the Bretton Woods Conference in 1944.and TRIPS. by countries with payment imbalances. technological factors. when .The IMF working to foster global monetary cooperation. secure financial stability. subsidise and provide essential national services on behalf of its citizens. facilitate international trade. The agreement affectively abolishes a government’s sovereign right to regulate. and reduce poverty. on a temporary basis. It facilitates various economies of the world in following sustainable economic growth. For example. they create an advantage business environment for enterprises. The World Bank comprises of the following two institutions: • International Bank for Reconstruction and Development: The IBRD focuses on low-income economies that have little access to global credit markets. The IMF works to improve the economies of its member countries. political factors. • Forecast about the future of world trade pattern From above analyzing. we can see that international trade develop likely nowaday due to factors such as: economical factors. And these things helped increase export and import of nations. Such services include everything from marine fishing to provisions for health and education. When nations join free trade areas or sign bilatiral agreements with each other. • International Development Association: The IDA focuses on helping the poorest nations. promote high employment and sustainable economic growth.For example: The General Agreement on Trade in Services (GATS) was agreed at the World Trade Organization (WTO) in 1994. The World Bank (WB) is a multinational corporation aiming at the alleviation of poverty. The IMF was important when it was first created because it helped the world stabilize the economic system. and help reduce tariff barriers.
with motto integrate. global production networks. coopration. This assignment has attempted to provide a better understanding of what factors have been changing the world trade. and stable political environment. Political factors also help development of international trade. easier… Development of international transportation such as: ship. air plane. This may seem a simple question. At the same time. foreign direct investment (FDI) helped enterprises reduce cost of production because of cheap price of employee. safer. integrate international trade is unique way so that nations develop. . globalization trend created opportunities for enterprises performed business actions in potential market. VietNam is ideal destination for investors. Inaddition. For example. train… helped goods come to export faster.dependency has rendered international economic co-operation more complex and multi-faceted. it has been repeatedly demonstrated that if institutions and nations do not adapt to change. export and import increased 25%/year. From above factors we can forecast future of development of world trade pattern when economical factors. Enterprises can sign contract with each other in two place have far distance. A clearly sample about these economical fators is the development of LDCs such as VietNam with 8. Modern payment systems of banks helped transactions performed faster. receive technology. Therefore. materials…. more convenient.5% growth in 2007 after joining WTO. but it turns out to have several answers. Open policies.VietNam join WTO. promote effective production. the will wither. The trend towards increased inter. Conclusion Globalization has brought economic interaction among nations closer than ever before. integrate. An historical review of trade relations since the establishment of the GATT/ WTO strongly points to the importance of building and sustaining institutional arrangements to underwrite international trade relations. Technological factors promoted development of international trade. political factors and technological develop. development togather. Internet helped enterprises promote sales. thanks in no small part to revolutions in information and transport technology and growing openness in government policy.
How trade will contribute to managing environmental challenges and vice versa is doubtless an issue about which we shall hear a lot more. The poorer country can gain from world trade. Collectively. these countries represent around 90 per cent of global gross national product. payment systems revolutions could be one of the root causes that turn international trade into a different one. These factors have made the world flat. The raising voice of these countries has made the world trade balance to be shifted from Developed countries to a more balanced point. and world trade is one of them. These numbers give the G-20 a considerable degree of legitimacy. But what of future challenges. as it brings together important industrial and emerging-market countries from all regions of the world. The G-20 has been praised for its more balanced membership. The recent global economic crisis has accelerated the rise of the BRICs. Brazil-RussiaIndia-China. 80 per cent of world trade and two-thirds of the world's population. information. exchange goods and services in various ways our ancestors could have never imagined in last century. The achievement of transport. technology always has it influences in many fields. Last but not least.becoming increasingly regarded as vestiges of an older world driven by different interests than those that shape the present. The forum for discussing issues of global economic governance has shifted from the G-8 to a more comprehensive G-20. not loss as we used to know. . of issues that are beginning to call a new effort and evolve the world trade? We should concern more about the environmental factors as there are a lot of human efforts to deal with the global warming and more government are introducing laws and policies in protecting the contamination and pollution. in compared with that in the past.
. Fall 1987 “Intra-industry Specialization and the Gains From Trade.2. 1981 . Washington. D. April 1988 “Is Free Trade Passé?. 89.51. Can the Government Govern?.” in John Chubb.REFERENCES • • Michael Porter’s book.” Business Economics.: The Brookings Institute.” Journal of Political Economy. Competitive Advantage of Nations David Yoffie. 1989 • • • Paul Krugman’s “Rethinking International Trade. ed. “American Trade Policy: An Obsolete Bargain?.C.” Journal of Economic Perspectives. 1.
“Theory of Games and Economic Behavior” J. McDougall and Richard H. T. “Trade and Industrial Policy under Imperfect Competition.S.” Cambridge. E. 2883 Alasdair Smith and Anthony Venables. David Richardson. Milner and B. DUTY CHART .. MA: NBER Working Paper No. University of Cambridge Mansfield.” Cambridge Working Papers in Economics 0742. Gassebner.D.” Economic Policy.P. and M. “Empirical Research on Trade Liberalization with Imperfect Competition: A Survey. American Political Science Review And other sources. Automobile Industry. and International Trade”.V. Faculty of Economics. Rosendorff.A. “Do Autocratic States Trade Less?. “Free to Trade: Democracies.” World Trade Report 2011: The WTO and preferential trade agreements: From coexistence to coherence Multinational Corporations and Global Production Networks: The Implications for Trade Policy Global production networks and the analysis of economic development Aidt. Snape John von Neumann and Oskar Morgenstern.• • • • • • • • • • “The Theory of Intra-industry Trade” which was published in I.S. 1 Avinash Dixit. 2007. 2000. Autocracies. v. “Optimal Trade and Industrial Policies for the U. H.
Member’s name Task Vũ Thị Thu Hằng Title & abstract. Introduction and Conclusion Kathkeo Vogpadith Nothing Lê Thạch Anh New theories of international trade Preferential Trade Agreements + Global production networks Growth of developing countries + Internet + Classical theories of international trade + Edit the draft International Payment System + International Transportation Local policies + Globalization trend and World Organization’s influences Lê Thị Ngọc Ngô Thị Ngọc Bích Nguyễn Khánh Linh Phạm Văn Hà Nguyễn Văn Thiện Forecast about the future of world trade pattern .
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