Finance:International trade

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Short description: Exchange across international borders
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International trade is the exchange of capital, goods, and services across international borders or territories[1] because there is a need or want of goods or services.[2]

In most countries, such trade represents a significant share of gross domestic product (GDP). While international trade has existed throughout history (for example Uttarapatha, Silk Road, Amber Road, salt roads), its economic, social, and political importance has been on the rise in recent centuries.

Carrying out trade at an international level is a complex process when compared to domestic trade. When trade takes place between two or more states, factors like currency, government policies, economy, judicial system, laws, and markets influence trade.

To ease and justify the process of trade between countries of different economic standing in the modern era, some international economic organizations were formed, such as the World Trade Organization. These organizations work towards the facilitation and growth of international trade. Statistical services of intergovernmental and supranational organizations and governmental statistical agencies publish official statistics on international trade.

Characteristics of global trade

Further information: World economy

A product that is transferred or sold from a party in one country to a party in another country is an export from the originating country, and an import to the country receiving that product. Imports and exports are accounted for in a country's current account in the balance of payments.[3]

Trading globally may give consumers and countries the opportunity to be exposed to new markets and products. Almost every kind of product can be found in the international market, for example: food, clothes, spare parts, oil, jewellery, wine, stocks, currencies, and water. Services are also traded, such as in tourism, banking, consulting, and transportation.

The ancient Silk Road trade routes across Eurasia

Advanced technology (including transportation), globalization, industrialization, outsourcing and multinational corporations have major impacts on the international trade systems.

Differences from domestic trade

Ports play an important role in facilitating international trade. The Port of New York and New Jersey grew from the original harbor at the convergence of the Hudson River and the East River at the Upper New York Bay.

International trade is, in principle, not different from domestic trade as the motivation and the behavior of parties involved in a trade do not change fundamentally regardless of whether trade is across a border or not.

However, in practical terms, carrying out trade at an international level is typically a more complex process than domestic trade. The main difference is that international trade is typically more costly than domestic trade. This is due to the fact that cross-border trade typically incurs additional costs such as explicit tariffs as well as explicit or implicit non-tariff barriers such as time costs (due to border delays), language and cultural differences, product safety, the legal system, and so on.

Another difference between domestic and international trade is that factors of production such as capital and labor are often more mobile within a country than across countries. Thus, international trade is mostly restricted to trade in goods and services, and only to a lesser extent to trade in capital, labour, or other factors of production. Trade in goods and services can serve as a substitute for trade in factors of production. Instead of importing a factor of production, a country can import goods that make intensive use of that factor of production and thus embody it. An example of this is the import of labor-intensive goods by the United States from China. Instead of importing Chinese labor, the United States imports goods that were produced with Chinese labor. One report in 2010, suggested that international trade was increased when a country hosted a network of immigrants, but the trade effect was weakened when the immigrants became assimilated into their new country.[4]

History

The history of international trade chronicles notable events that have affected trading among various economies.

Theories and models

Main article: International trade theory

There are several models that seek to explain the factors behind international trade, the welfare consequences of trade and the pattern of trade.

Most traded export products

Largest countries or regions by total international trade

Volume of world merchandise exports

The following table is a list of the 30 largest trading states according to the World Trade Organization in 2024.[5][6]

International trade (millions of USD)
Rank State Goods Services Goods and
services
– World 49,177,769 16,930,782 66,108,551
–  European Union 5,429,683 3,156,243 8,585,926
1  United States 5,424,499 1,993,624 7,418,123
2  China 6,163,999 1,056,457 7,220,456
3  Germany 3,107,433 1,023,755 4,131,188
4  United Kingdom 1,328,813 1,050,548 2,379,361
5  Netherlands 1,732,989 640,644 2,373,633
6  France 1,390,477 740,560 2,131,037
7  Japan 1,449,636 474,705 1,924,341
8  India 1,144,196 644,197 1,788,393
9  Singapore 964,344 746,688 1,711,032
10  South Korea 1,315,376 301,607 1,616,983
11  Italy 1,289,671 318,022 1,607,693
12  Hong Kong 1,349,678 199,642 1,549,320
13  Canada 1,141,276 319,173 1,460,449
14  United Arab Emirates 1,142,066 283,962 1,426,028
15  Mexico 1,261,074 125,087 1,386,161
16  Ireland 383,054 986,640 1,369,694
17  Belgium 1,048,406 307,233 1,355,639
18  Spain 896,146 331,898 1,228,044
19  Switzerland 816,072 394,410 1,210,482
20  Taiwan 875,482 129,912 1,005,394
21  Poland 759,378 193,934 953,312
22  Vietnam 782,268 60,044 842,312
23  Russia 711,706 121,512 833,218
24  Australia 637,759 192,015 829,744
25  Turkey 605,875 168,506 774,381
26  Brazil 615,000 151,513 766,513
27  Thailand 607,339 145,786 753,125
28  Malaysia 630,781 109,773 740,554
29  Saudi Arabia 537,338 156,942 694,280
30  Sweden 382,556 241,841 624,397

Top traded commodities by value (exports)

Traded commodities in 2022
Rank Commodity Value in US$
(millions)		 Date of
information
1 Mineral fuels, oils, distillation products 3,988,389 2022
2 Electrical, electronic equipment 3,493,553 2022
3 Machinery, nuclear reactors, boilers, etc. 2,573,572 2022
4 Vehicles (excluding railway) 1,621,658 2022
5 Pharmaceutical products 875,345 2022
6 Pearls, precious stones, metals, coins, etc. 866,839 2022
7 Plastics and articles thereof 815,554 2022
8 Optical, photo, technical, medical, etc. apparatus 669,128 2022
9 Iron and steel 564,547 2022
10 Organic chemicals 537,854 2022

Source: International Trade Centre[7]

Observances

In the US, starting in 1935, the various U.S. presidents have held "World Trade Week" observances to promote large and small companies to be more involved with the export and import of goods and services. This tradition was preceded by a local observance of "Foreign Trade Week" by the Los Angeles Area Chamber of Commerce that originated in 1927 as an expansion of United States National Maritime Day.

Every year the President declares the third week of May to be World Trade Week.[8][9]

  • President George W. Bush observed World Trade Week on May 18, 2001 and May 17, 2002.[10][11]
  • On May 13, 2016, President Barack Obama proclaimed May 15–21, 2016 as World Trade Week.[12]
  • On May 19, 2017, President Donald Trump proclaimed May 21–27, 2017 as World Trade Week.[13][14]

International trade vs local production

Food security

Main article: Earth:Food security

The trade-offs between local food production and distant food production are controversial, with limited studies comparing environmental impact and scientists cautioning that regionally specific environmental impacts should be considered.[15] A 2020 study indicated that local food crop production alone cannot meet the demand for most food crops with "current production and consumption patterns" and the locations of food production at the time of the study for 72–89% of the global population and 100 km radiuses as of early 2020.[clarification needed][16][17][18] Studies found that food miles are a relatively minor factor for carbon emissions, albeit increased food localization may also enable additional, more significant, environmental benefits such as recycling of energy, water, and nutrients.[19] For specific foods regional differences in harvest seasons may make it more environmentally friendly to import from distant regions than more local production and storage or local production in greenhouses.[20]

Qualitative differences and economic aspects

Qualitative differences between substitutive products of different production regions may exist due to different legal requirements and quality standards or different levels of controllability by local production- and governance-systems which may have aspects of security beyond resource security, environmental protection, product quality and product design and health. The process of transforming supply as well as labor rights may differ as well.

Local production has been reported to increase local employment in many cases. A 2018 study claimed that international trade can increase local employment.[21] A 2016 study found that local employment and total labor income in both manufacturing and nonmanufacturing were negatively affected by rising exposure to imports.[22]

Local production in high-income countries, rather than distant regions may require higher wages for workers. Higher wages incentivize automation[23] which could allow for automated workers' time to be reallocated by society and its economic mechanisms or be converted into leisure-like time.

Specialization, production efficiency and regional differences

Resource security

File:Water, energy and land insecurity in global supply chains.webm A systematic, and possibly first large-scale, cross-sectoral analysis of water, energy and land in security in 189 countries that links total and sectorial consumption to sources showed that countries and sectors are highly exposed to over-exploited, insecure, and degraded such resources with economic globalization having decreased security of global supply chains. The 2020 study finds that most countries exhibit greater exposure to resource risks via international trade – mainly from remote production sources – and that diversifying trading partners is unlikely to help countries and sectors to reduce these or to improve their resource self-sufficiency.[24][25][26][27]

Illicit trade

Illegal gold trade

A number of people in Africa, including children, were using informal or "artisanal" methods to produce gold. While millions were making a livelihood through this small-scale mining, governments of Ghana, Tanzania and Zambia complained about the increase in illegal production and gold smuggling. Sometimes the procedure involved criminal operations and even human and environmental cost. Investigative reports based on Africa's export data revealed that gold in large quantities is smuggled out of the country[clarification needed] through the United Arab Emirates, without any taxes being paid to the producing states. Analysis also reflected discrepancies in the amount exported from Africa and the total gold imported into the UAE.[28]

In July 2020, a report by Swissaid highlighted that the Dubai-based precious metal refining firms, including Kaloti Jewellery International Group and Trust One Financial Services (T1FS), received most of their gold from poor African states like Sudan. The gold mines in Sudan were seldom under the militias[clarification needed] involved in war crimes and human rights abuses. The Swissaid report also highlighted that the illicit gold coming into Dubai from Africa is imported in large quantities by the world's largest refinery in Switzerland, Valcambi.[29][30]

Another report in March 2022 revealed the contradiction between the lucrative gold trade of West African countries and the illicit dealings. Like Sudan, Democratic Republic of Congo (DRC), Ghana and other states, discrepancies were recorded between the gold production in Mali and its trade with Dubai, UAE. The third largest gold exporter in Africa, Mali imposed taxes only on the first 50 kg (110 lb) of gold exports per month, which allowed several small-scale miners to enjoy tax exemptions and smuggle gold worth millions. In 2014, Mali's gold production was 45.8 tonnes, while the UAE's gold imports were 59.9 tonnes.[31][32]

Statistics

  • List of countries by imports
  • List of countries by exports
    • List of countries by merchandise exports
    • List of countries by service exports and imports
    • List of top exporting countries by product category
    • List of countries by exports per capita
  • List of countries by leading trade partners
  • List of countries by net goods exports (Balance of trade)
  • List of sovereign states by current account balance
  • List of countries by tariff rate

See also

References

  1. ↑ "Trade – Define Trade at Dictionary.com". Dictionary.com. http://dictionary.reference.com/browse/trade. 
  2. ↑ "International Trade and Finance by ICC Academy". https://www.edumaritime.net/icc-academy. 
  3. ↑ "Balance Of Payments (BOP)" (in en-US). Investopedia. 2003-11-25. http://www.investopedia.com/terms/b/bop.asp. 
  4. ↑ Kusum Mundra (October 18, 2010). "Immigrant Networks and U.S. Bilateral Trade: The Role of Immigrant Income". Department of Economics, Rutgers University. 
  5. ↑ "WTO Stats". World Trade Organization. https://stats.wto.org/?idSavedQuery=062b87c0-a3cf-4395-ac1b-4e9bbc327ba9. 
  6. ↑ "WTO Stats". World Trade Organization. https://stats.wto.org/dashboard/services_en.html. 
  7. ↑ "List of exporters for the selected product in 2022". https://www.trademap.org/Country_SelProduct.aspx?nvpm=1%7c%7c%7c%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c1%7c%7c2%7c1%7c1%7c1. 
  8. ↑ "Import Export Data". http://www.eximatlasindia.com/. 
  9. ↑ "World Trade Week New York". http://www.worldtradeweeknyc.org/. 
  10. ↑ Office of the Press Secretary (May 22, 2001). "World Trade Week, 2001". Federal Register (Washington, D.C.: Federal Government of the United States). https://www.federalregister.gov/documents/2001/05/22/01-13115/world-trade-week-2001.  Alt URL
  11. ↑ Office of the Press Secretary (May 22, 2002). "World Trade Week, 2002". Federal Register (Washington, D.C.: Federal Government of the United States). https://www.federalregister.gov/documents/2002/05/22/02-13030/world-trade-week-2002.  Alt URL
  12. ↑ "Presidential Proclamation -- World Trade Week, 2016" (in en). whitehouse.gov (Washington, D.C.). May 13, 2016. https://obamawhitehouse.archives.gov/the-press-office/2016/05/13/presidential-proclamation-world-trade-week-2016. 
  13. ↑ Office of the Press Secretary (May 19, 2017). "President Donald J. Trump Proclaims May 21 through May 27, 2017, as World Trade Week" (in en). whitehouse.gov (Washington, D.C.: White House). https://www.whitehouse.gov/the-press-office/2017/05/19/president-donald-j-trump-proclaims-may-21-through-may-27-2017-world. 
  14. ↑ "President Donald J. Trump Proclaims May 21 through May 27, 2017, as World Trade Week". World News Network (United States: World News Inc.). May 20, 2017. https://article.wn.com/view/2017/05/20/President_Donald_J_Trump_Proclaims_May_21_through_May_27_201_z/. 
  15. ↑ Rothwell, Alison; Ridoutt, Brad; Page, Girija; Bellotti, William (15 February 2016). "Environmental performance of local food: trade-offs and implications for climate resilience in a developed city" (in en). Journal of Cleaner Production 114: 420–430. doi:10.1016/j.jclepro.2015.04.096. ISSN 0959-6526. Bibcode: 2016JCPro.114..420R. https://www.sciencedirect.com/science/article/abs/pii/S0959652615004710. Retrieved 4 December 2020. 
  16. ↑ Dunphy, Siobhán (28 April 2020). "Majority of the world's population depends on imported food". European Scientist. https://www.europeanscientist.com/en/agriculture/majority-of-the-worlds-population-depends-on-imported-food/. 
  17. ↑ "Relying on 'local food' is a distant dream for most of the world" (in en). phys.org. https://phys.org/news/2020-04-local-food-distant-world.html. 
  18. ↑ Kinnunen, Pekka; Guillaume, Joseph H. A.; Taka, Maija; D'Odorico, Paolo; Siebert, Stefan; Puma, Michael J.; Jalava, Mika; Kummu, Matti (April 2020). "Local food crop production can fulfil demand for less than one-third of the population". Nature Food 1 (4): 229–237. doi:10.1038/s43016-020-0060-7. Bibcode: 2020NatFd...1..229K. 
  19. ↑ Yang, Yi; Campbell, J. Elliott (1 March 2017). "Improving attributional life cycle assessment for decision support: The case of local food in sustainable design" (in en). Journal of Cleaner Production 145: 361–366. doi:10.1016/j.jclepro.2017.01.020. ISSN 0959-6526. Bibcode: 2017JCPro.145..361Y. https://www.sciencedirect.com/science/article/abs/pii/S0959652617300276. Retrieved 4 December 2020. 
  20. ↑ Edwards-Jones, Gareth (2010). "Does eating local food reduce the environmental impact of food production and enhance consumer health?" (in en). Proceedings of the Nutrition Society 69 (4): 582–591. doi:10.1017/S0029665110002004. ISSN 1475-2719. PMID 20696093. 
  21. ↑ Wang, Zhi; Wei, Shang-Jin; Yu, Xinding; Zhu, Kunfu (13 August 2018). "Re-examining the Effects of Trading with China on Local Labor Markets: A Supply Chain Perspective". Working Paper Series (National Bureau of Economic Research). doi:10.3386/w24886. https://www.nber.org/papers/w24886. Retrieved 4 December 2020. 
  22. ↑ Malgouyres, Clément (2017). "The Impact of Chinese Import Competition on the Local Structure of Employment and Wages: Evidence from France" (in en). Journal of Regional Science 57 (3): 411–441. doi:10.1111/jors.12303. ISSN 1467-9787. Bibcode: 2017JRegS..57..411M. https://onlinelibrary.wiley.com/doi/full/10.1111/jors.12303. Retrieved 4 December 2020. 
  23. ↑ "How Artificial Intelligence Could Widen the Gap Between Rich and Poor Nations". 2 December 2020. https://blogs.imf.org/2020/12/02/how-artificial-intelligence-could-widen-the-gap-between-rich-and-poor-nations/. "Higher wages Advanced economies have higher wages because total factor productivity is higher. These higher wages induce firms in advanced economies to use robots more intensively, to begin with, especially when robots easily substitute for workers. Then, when robot productivity rises, the advanced economy will benefit more in the long run. This divergence grows larger, the more robots substitute for workers." 
  24. ↑ "Global trade linked to resource insecurity" (in en-AU). Cosmos Magazine. 26 October 2020. https://cosmosmagazine.com/earth/sustainability/global-trade-linked-to-resource-insecurity/. 
  25. ↑ Dunphy, Siobhán (20 November 2020). "Is globalisation compatible with sustainable and resilient supply chains?". European Scientist. https://www.europeanscientist.com/en/agriculture/is-globalisation-compatible-with-sustainable-and-resilient-supply-chains/. 
  26. ↑ "Globalized economy making water, energy and land insecurity worse: study" (in en). https://phys.org/news/2020-10-globalized-economy-energy-insecurity-worse.html. 
  27. ↑ Taherzadeh, Oliver; Bithell, Mike; Richards, Keith (28 October 2020). "Water, energy and land insecurity in global supply chains" (in en). Global Environmental Change 67. doi:10.1016/j.gloenvcha.2020.102158. ISSN 0959-3780. https://www.sciencedirect.com/science/article/abs/pii/S095937802030741X. Retrieved 3 December 2020. 
  28. ↑ Lewis, David; Mcneill, Ryan; Shabalala, Zandi (April 24, 2019). "Gold worth billions smuggled out of Africa". https://www.reuters.com/investigates/special-report/gold-africa-smuggling/. 
  29. ↑ Etienne, Richard (16 July 2020). "L'or douteux de Dubaï est prisé en Suisse". https://www.letemps.ch/economie/lor-douteux-dubai-prise-suisse. 
  30. ↑ Ummel, Marc (July 2020). "GOLDEN DETOUR: The hidden face of the gold trade between the United Arab Emirates and Switzerland". https://swissaid.kinsta.cloud/wp-content/uploads/2020/07/SWISSAID-Goldstudie-EN_final-web.pdf. 
  31. ↑ Abderrahmane, Abdelkader (11 March 2022). "Mali: West Africa's hub for illegal gold trade with Dubai". https://enactafrica.org/enact-observer/mali-west-africas-hub-for-illegal-gold-trade-with-dubai. 
  32. ↑ Abderrahmane, Abdelkader (3 August 2022). "Mali to Dubai: artery for West Africa's booming illegal gold trade". https://issafrica.org/iss-today/mali-to-dubai-artery-for-west-africas-booming-illegal-gold-trade. 

Further reading

  • Helpman, Elhanan (2011). Understanding Global Trade. Cambridge, Massachusetts: Harvard University Press. ISBN 978-0-674-06078-4. 
  • Nelson, Scott Reynolds (2022). Oceans of Grain: How American Wheat Remade the World. New York: Basic Books. ISBN 978-1-5416-4646-9. 
  • Linsi, Lukas; Burgoon, Brian; Mügge, Daniel K (2023). "The Problem with Trade Measurement in International Relations". International Studies Quarterly 67 (2). doi:10.1093/isq/sqad020. 

Sources

  • Jones, Ronald W. (1961). "Comparative Advantage and the Theory of Tariffs". The Review of Economic Studies 28 (3): 161–175. doi:10.2307/2295945. 
  • McKenzie, Lionel W. (1954). "Specialization and Efficiency in World Production". The Review of Economic Studies 21 (3): 165–180. doi:10.2307/2295770. 
  • Samuelson, Paul (2001). "A Ricardo-Sraffa Paradigm Comparing the Gains from Trade in Inputs and Finished Goods". Journal of Economic Literature 39 (4): 1204–1214. doi:10.1257/jel.39.4.1204. 

Data

Main article: Finance:Trade data

Statistics from intergovernmental sources

Data on the value of exports and imports and their quantities often broken down by detailed lists of products are available in statistical collections on international trade published by the statistical services of intergovernmental and supranational organisations and national statistical institutes. The definitions and methodological concepts applied for the various statistical collections on international trade often differ in terms of definition (e.g. special trade vs. general trade) and coverage (reporting thresholds, inclusion of trade in services, estimates for smuggled goods and cross-border provision of illegal services). Metadata providing information on definitions and methods are often published along with the data.



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