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Global Trade is Still Important | Here’s Why
Coca-Cola is one of those products that can be found all over the world. Why is this?
The reason is international trade, otherwise known as the exchange of capital, goods and services across international borders. A driving force of this has been globalisation, where countries are becoming increasingly dependent on others for GDP growth and development.
Here are some examples of increased globalisation:
1. In the early 1960s, global trade accounted for approximately 12% of global GDP
2. By 2010, this figure had risen to 29%
3. Technology companies who outsource services, such as customer service call centres and software development. This is to save production costs on wages
4. Global manufacturing’s share in the world merchandise trade in 2010 was as high as 69%
5. Developing countries playing a larger role in the world economy. China is one example. In 1980, they accounted for only 0.8% of world manufacturing. In 2012, this figure had risen to more than 16.8%.
How does one participate in the global economy?
This requires money, and it can come from many sources:
1. Trade surpluses – when countries export more than they import overall, they will experience a trade surplus. They are making more money from trade than they are spending. A trade deficit is the opposite; where countries lose more from trade than they make
2. Investment Income – to pay for deficits, countries can draw from investment income. This is money that comes from financial investments from abroad, such as dividends from shares of foreign companies.
3. Foreign aid – these are grants given by other governments. These funds can work to cover trade deficits. But countries may have to borrow money or sell assets to make more.
If this trend continues, globalisation will only make international trade more significant in the future.
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