In an era of a globalized world where markets are open and accessible to diverse players and demand for products and services increasing by the day, international trade takes center stage. International trade refers to the economic transactions undertaken between countries, usually involving the exchange of goods and services in the form of imports and exports. International trade seeks to institute a balance in the country’s economy by acquiring the commodities it lacks in exchange for those it produces in abundance. The transactions under international trade are based on policies that seek to improve the country’s standard of living. International trade relations emphasize on the promotion of free trade between countries. Trade between emerging economies, with China serving as the anchor, proliferated in the recent past and provides justification for review of their role in the global economy.
Economic observers worldwide concede that international trade between emerging economies plays an important role in circumvention of the uncertainty in the global arena. The inquest into the long stand trade agreements between the US and its partners by President Trump’s administration elicits legitimate concerns about the potential restrictive policies. As a result, emerging economies assume the mantle of charting their course by trading between themselves, a development with diverse implications for the countries concerned. Woetzel and Madgavkar (2018) estimated international trade between emerging economies to account for 20% of the total value of global trade, a 12% growth from 1995. According to Nölke, ten Brink, Claar, and May (2015) emerging economies represent the most crucial contemporary developments in the political global economy. International trade requires come commonalities among global economic institutions, which has influenced modeling of domestic structures and foreign economic policies by emerging economies to enhance functionality in the global economic order.
Delegate your assignment to our experts and they will do the rest.
International trade is responsible for the development of state-permeated market economy type of capitalism and domestic institutional structures that influence foreign policy (Nölke et al. , 2015). The freedom that comes with international trade allows emerging economies to adopt a strategic place in the global economy. Emerging economies appear to have only an upward trajectory compared to established economies. Hanson (2012) observed that the US, countries in the EU, and Japan bore the most burden because of their slow recovery following the global financial crisis of 2008. On the contrary, progress of high-income and emerging economies such as Brazil, China, and India was not affected during this time.
As a result, international trade has created a palpable power shift in global economy. Multinational firms from emerging economies are actively engaged in foreign direct investment, acquiring assets abroad at the expense of established economies. The sluggishness in prospects of international trade in the past few years affected high-income countries dramatically. As a result, the once unassailable institutions, the World Trade Organization and International Monetary Fund, spend significant resources examining the balance sheets of these countries, hence, lower income countries slipped to the top unnoticed (Hanson, 2012). The current restrictive policies on China by the US, and the UK Brexit conundrum can be argued to be reactionary efforts upon realization that emerging economies are a real threat to the balance of global economic power, courtesy of international trade.
A report filed by Amadeo (2019) on international trade estimated the total trade between countries at $34 trillion ($17 trillion in exports and $17 trillion in imports). The implication for the emerging economies is evident in the breakdown of the goods and services traded. Machines and technology comprised the highest commodities traded with computers, electrical machinery, boilers, nuclear reactors, and scientific and precision instruments accounting for at least one quarter of the international trade. Automobiles were approximated at 9%, mineral fuel comprising of oil, gas, coal, refined fuels at 14%, and other commodities like iron, plastics, diamonds, organic chemicals, and pharmaceuticals adding 13% (Amadeo, 2019). The above commodities are labor intensive, and emerging economies have the advantage in their production owing to prevailing favorable labor conditions. The economic freedom under international trade allowed emerging economies to invest in labor-intensive manufacturing, increasing their exports substantially. Initially, China led the pack but other emerging economies have risen to the challenge filling the gap of intensive-manufacturing exports including textiles (Woetzel and Madgavkar, 2018).
Emerging economies have put in place measures to drive their economic growth in the global arena, ranging from reliable infrastructure to creation of business-friendly investment environments. Other countries have specialized in the production of export commodities, while others seek to increase their share of research and development and capital-intensive production as the expense of some growth in labor-intensive production (Woetzel and Madgavkar, 2018). Many emerging economies continue to attract investors, increasing their prospects in the global economy. For instance, India, is among the fastest growing global economies, and continues to be an attractive destination for foreign direct investment (Edoun & KGaphola, 2017). The trend is the same across emerging economies because international trade has opened up avenues for them to compete favorably with high-income nations in a liberal global market.
According to Edoun and KGaphola (2017), India is projected to lead the pack of emerging market economies by becoming the fasted growing economy in the world in the next decades. Most emerging economies face a similar predicament because their potential for growth remains largely unexplored and underutilized. Emerging markets are believed to have the capacity to drive global economy into the future because they are founded on sound market fundamentals. These economies have found the solutions for relative stability in the current turbulent global economy, which makes them better placed to be drivers of future developments in international trade. Emerging economies have better balance of payments than developed economies, with their surpluses playing to their advantage where foreign investment and borrowing is concerned. Emerging economies are founded on the concept of advancing the livelihoods of people. Increase in disposable income in these economies has ripple effects on their economies. The increase in purchasing power means more imports and exports, which would call for strengthening of international trade relationships. Overall, emerging economies have a long way to go before reaching the economic level of developed economies, implying they would be the main actors shaping developments in the global economy for the next several decades.
According to Forbes, most emerging economies have favorable dynamics of the workforce. For instance, most countries under this bracket have young working populations that can contribute to the economy for decades to come. The ration of working age to retired age is significantly high in India and Brazil, with majority of India’s population being under 44 years, a trend that is projected to continue to 2030s. The US has the bulk of its population in the flat phase, while China’s population is aging, aspects that make funding of entitlement programs such as Medicaid for retirees through taxation a challenge. Emerging economies have significant proportions of their population in the workforce, hence, are capable of economic progress through taxation. The growth in multinational companies from emerging economies following investment in foreign countries is disruptive to the status quo enjoyed by companies from developed nations. Investors are becoming increasingly apprehensive of the developments in the emerging economies and their interest in stocks of companies from these countries is peaking. Therefore, emerging economies would be in position to dictate proceedings because their firms will be the largest players in the global arena in the decades to come. The future of emerging economies is also dependent on the running of prospects on resources. For instance, Brazil is rich in natural resources, while China leads in the export of raw materials. Other emerging economies have extensive natural resources that would place them in the global map for many decades to come. These resources have either been underutilized or are being discovered, and maximizing of their economic potential would have substantial effects in the shift in international trade. Emerging economies would have the negotiating power because they have the raw materials developed countries require to produce and export, a development that would level the playing field in the global markets.
References
Amadeo, K. (2019). International trade, its pros, cons, and effect on the economy. The Balance. Retrieved from https://www.thebalance.com/international-trade-pros-cons-effect-on-economy-3305579
Edoun, I., & KGaphola, H. (2017). The Effect of International Trade on emerging economies: The case of India. In Proceedings of International Academic Conferences (No. 5907962). International Institute of Social and Economic Sciences.
Hanson, G. H. (2012). The rise of middle kingdoms: Emerging economies in global trade. Journal of Economic Perspectives , 26 (2), 41-64.
Nölke, A., ten Brink, T., Claar, S., & May, C. (2015). Domestic structures, foreign economic policies and global economic order: Implications from the rise of large emerging economies. European journal of international relations , 21 (3), 538-567.
Woetzel, J., & Madgavkar, A. (2018). It's a tough time for trade. But emerging economies are moving ahead. CNN Business. Retrieved from https://edition.cnn.com/2018/10/19/perspectives/china-trade-emerging-economies/index.html
