Overview of International Trade
- International trade arises from differences between nations. Typically, differences in technology, education, demand, policies, laws, wages, and opportunities spur trade.
- Barriers like subsidies, tariffs, quotas, licenses, and standardization prevent trade and protect domestic markets.
- The world economies have become intertwined through globalization. International trade is part of most economies.
- Trade creates competitive pressures resulting in declining domestic industries. Consumers buying cheaper imports are winners.
- But governments must manage job losses in some areas without undermining benefits from trade.
Recent Trends in International Trade
- After two quarters of decline, G20 exports rebounded in Q1 2023 in value terms, increasing by 2.2% driven by China.
- Imports contracted 1.2% reflecting easing energy prices. Trade tensions between the US and China hit markets.
- Shares with exposure to China, like Boeing and Deere, were among the hardest hit. GM urged constructive dialogue.
- Its stock fell 3% then closed nearly 3% higher.
Effects of International Trade
- The US economy is much closer to recession than markets are pricing.
- Success in international trade created Britain’s high wage, cheap energy economy, the springboard for the Industrial Revolution.
- High wages and cheap energy created demand for technology substituting capital and energy for labor in many industries.
- The Industrial Revolution helped trade and agriculture develop.
Who Loses from International Trade?
- International trade arises from differences between nations. Barriers prevent trade and protect markets. Trade creates pressures, declining industries.
- Consumers buying imports are winners. But governments must manage job losses, undermining benefits from trade.
- Success in trade created Britain’s economy, the springboard for the Revolution. The Revolution helped develop trade, agriculture.