Challenges and Emerging Trends in Global Trade

Trade interconnectedness:

  • The number of systemically important trading nations increased over time, their trade links have also
    multiplied. It is due to the increase in supply chain system facilitated by lower tariffs and a decline in transportation and communication costs.
  • The increase in international trade is due to liberalization and specialization.
  • The multilateral and bilateral liberalization has led to significantly lower trade barriers in advanced economies.
  • Advanced countries and emerging market economies play different roles in global supply chains.
    Advanced economies tend to be upstream in the supply chain. This position is characterized by relatively small foreign contents in their exports and relatively large contributions towards other downstream countries’ exports.

Ease of Doing Global Business:

  • Restrictions like the forbidding movement of labour, resources, and capital make international trade cumbersome. These restrictions may change at any time. Hence the ability to sustain international trade is always uncertain.
  • However, governments today impose fewer restrictions on cross-border movements than they did a decade or two ago, allowing companies to better take advantage of international opportunities.
  • Due to liberalization consumers have better access to a greater variety of goods and services at lower prices and local producers become more efficient by competing against foreign companies.
  • liberalization or granting most favoured nation (MFN) status is a reciprocative process. If they reduce their own restrictions, other countries will do the same. and thus trade becomes easier.

Emerging market economies as major players:

  • In the early 1970s, trade was largely confined to a handful of advanced economies, like the United States, Germany, and Japan, which together accounted for more than a third of the global trade. By 1990, several emerging market economies, especially in East Asia entered in global trade.
  • The emerging markets have increased the potential size and worth of current major international trade and facilitated the emergence of a whole new generation of innovative companies. These economies now rival the rich countries for business innovation.

Cooperation among Countries:

  • Countries cooperate with each other by signing treaties and having consultations. It helps in eliminating restrictions on trade and by laying the frameworks that reduce uncertainties.
  • They do so to gain reciprocal advantages, to tackle a problem they cannot solve alone.
  • G20 or BRICS or SARC countries have agreed to protect the property of foreign-owned companies and to permit foreign-made goods and services to enter their territories with fewer restrictions.

Transfer of Technology:

  • Technology transfer is the process by which commercial technology is disseminated.  It will involve the communication, by the transferor, of the relevant knowledge to the recipient.
  • This technology transfer may be in the field of infrastructure or agricultural development or in the defence sector. or in the fields of research, education, employment, and transport.

Forced Dynamism:

  • International trade is forced to succumb to trends that shape the global political, cultural, and economic environment. In today’s world, it is changing day by day. Such environment ads dynamism to global trade.

Rising Share of Higher Technology Goods:

  • Previously, international trade was restricted to agricultural goods and raw material.
  • The role of global supply chains for trade in high technology goods has increased over time, especially in China. The increase is particularly pronounced for China.

The Asian supply chain is more dispersed compared to those in North America or Europe:

  • In the Asian supply chain, goods-in-process cross borders several times, including through the hub (Japan), before reaching their final destination. In the case of the United States in NAFTA and EU15 in Europe, almost all foreign input is imported directly from the hub.
  • There is the possibility of disruptive trade flow in the Asian supply chain due to seen,  unseen and uncontrollable events like a natural disaster.

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