THE FACTORS AFFECTING PATTERNS OF TRADE BETWEEM COUNTRIES AND

CAUSES OF CHANGES IN THESE PATTERNS;

 Impact of emerging economies – economies nowadays grow very fast or
slow. When GDP grows the country is likely to import more goods and
services than before. It also export more to pay for these imports. So
economic growth will affect the patterns of trade internationally.
Emerging economies tend to experience higher economic growth rates
than developed economies, which disrupt existing trade patterns a their
share of world exports and imports grows. Many emerging economy
have a cost advantage than developed. Overtime many developed
countires move to exporting secondary sector and high-tech sectors.
Patterns of trade changes between emerging economy and developed
because of the increase in global supply chain. The increase in FDI
between countries also have affected the pattern of trade. Emerging
economies have received FDI inflows from developed countries but
equally FDI flows occur between emerging economies. Many firms in
developed countries have shifted production overseas for the advantage
of lower costs. However the advanced technologies can help reduce the
costs despite the high wage labour. Emerging increasingly represent new
markets for developed economies. If economic growth rates of emerging
economies remain higher than those of a developed economies , this
will open up fast growing markets.

 Changes in comparative advantage – this means that countries will

specialise in goods and services in which they have a comparative
advantage (Competitive advantage refers to factors that allow a
company to produce goods or services better or more cheaply than its
rivals. These factors allow the productive entity to generate more sales
or superior margins compared to its market rivals). The growth of
emerging economies means that many developed economies have
shifted their exports towards high valued goods and services. This makes
sense since advanced economies are likely to have a comparative
advantage in these. They can produce them at a lower opportunity cost
than emerging economies, because they have large supply of skilled
labour and technology.
 Growth of trading blocs and bilateral trading agreements – bilateral
trade agreements , which are designed to increase trade between
parcipating countries at the expense of other countries. Hence the
change the pattern of trade in terms of geographical composition of
exports and imports.

 Change in relative exchange rates – the exchange rate of one currency

for another affects the relative prices of goods between countries. So
changes in relative exchange rates affect patterns of trade unless they
very large. Its is long term changes which are sufficiently large that
impact trade.

 Changes in protectionism between countries – restrictions on free trade

between countries affect trade flows between countries. Countries will
be able to export a higher volume of goods and services , overseas if
other countries reduce tarrifs and quotas. Some barriers may only some
goods and services overseas, which will affect the composition of
different type of goods and services which are traded. Joining a trading
bloc removes barriers.

 The volume of world trade