The world economy has witnessed rapid growth in the recent centuries. The growth has taken place hugely and on one hand due to the fast growth of international trade, and also, on the other hand through regional trade. The growth can be alluded to the concerted attempts to reduce the barriers to trade that formerly, had constrained regional as well as international trade. There are developing countries that have expanded their economies to exploit the opportunities for economic enhancement via trade, though, others have not. Broader global trade liberalization in such countries would help in improving economic growth.
Bjelić (2012), asserts that Regional Trade Agreements (RTA) were common before 1947, and this was before any international trade regulations had commenced. They write in the article, “ New Approach in International Trade Analysis due to International Factor Movements ,” that goods and services would rarely move across national borders, not to mention the factors of production, as these, on their part, were hardly moved. As a result, growth, in terms of global output, was not as enormous as it presently is, since the trade in commodities was regarded as the main essential section of the international trade exchange. Presently, both the factors of production as well as goods and services are exchanged across national borders. Companies transport their services and goods to the markets that are based in foreign countries through their foreign express investment deals contrary to the traditional ways of international trade. Labor has replaced the need for trading in services as it moves from one nation to another. The author also asserts that the transnational agencies’ activities caused the major changes in the analyzing and gathering of statistical information on international trade. Therefore, the ancient traditional statistics for foreign trade are no longer an effective framework for the evaluation of the flows of the international trade.
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Most products in the past that dominated in the international trade were primary commodities acquired from nature with a negligible value added. The commodities normally served as contributions for industrialized production (Bjelić, 2012). The developed countries took advantage of RTA to stimulate their industries’ development. On the other hand, such countries imported the insufficient commodities they had from abroad and then made them into final products through industrial transformation process. Such products were sold within the country and their excess sold in other nations.
According to Bjelić (2012), the international trade’s regulation in industrial commodities commenced at a multilateral point immediately after the World War Two after countries adopted the General Agreement on Tariffs and Trade (GATT) in 1947. The liberalization of the regime for international trade for the industrial commodities due to the rounds of negotiations on multilateral trade under the umbrella of the 1947’s GATT was achieved via significant reduction in tariffs by the developed countries. The average duties on the industrialized commodities before GATT in developed nations were about forty percent. Such duties were reduced to about three percent after the final eighth round of negotiations on multilateral trade. As a result, the reduction in tariffs resulted in an impressive international trade’s growth in industrialized commodities during the twentieth century’s second half.
Baldwin (n.d) states in his article, “ The International Firm and Efficient Economic Allocation International Trade in Inputs and Outputs,” that international trade frees a nation from restraints that are enforced by its knowledge and factor endowments and allows it to make use of various factor bequests that are relatively well suited to be used in the production of specific goods. Additionally, the factor trade and the commodity remove the restraints that are on the limited and set of virtual factor endowments that exists in the global economy.
Carbaugh (n.d), discusses the benefits of Foreign Direct Investment (FDI) in his article, “International Economic, 15E.” He asserts that FDI results in the generation of spillovers, more wages, higher average productivity of labor, higher investment return rates, as well as the stimulation for capital goods exports.
To conclude with, Broader Global Trade Liberalization has helped countries improve their economic growth since its birth in 1947 as compared to the Regional Trade Agreements that limited the movement of the factors of production.
References
Baldwin, R. E. (n.d). The International Firm and Efficient Economic Allocation International Trade in Inputs and Outputs.
Bjelić P. (2012). New Approach in International Trade Analysis due to International Factor Movements. Vol. 7, p. 17-29. DOI: 10.7251/ZREFIS1307017B
Carbaugh, R. (n.d). International Economics, 15E. (PowerPoint Slides)
