Debates about Trade

Does trade globalization increase economic growth? Does globalization reduce poverty? Explore the Debates about Trade and Development

International Trade Flows and Inequality

What is trade?

Trade refers to the exchange of goods and services for money. Sen argues that exchange is a human right, “the freedom to exchange words, goods, or gifts does not need defensive justification...they are part of the way human beings in society live and interact with one another" (1999: 8). International trade refers to "sales which cross juridical borders" (Sutcliffe 2001: 71). The control of trade has been, and continues to be, an important focus of state policy, and a determinant of international inequality.

One way to understand the effect of international trade on a country's economy is to examine its trade as a percent of Gross Domestic Product.

The structure of world trade

With the rise of a global trading system at the time of European colonial expansion, a 'colonial division of labor' emerged in which developing countries exported primary products, agriculture and minerals, while Europe and North America exported manufactured goods. The structure of world trade has begun to change since World War II and particularly in the last three decades. Important characteristics of current global trade patterns now include:

* 75 % of the world's exports are from developed countries, while only 25% are from developing ones;
* developed countries export mainly manufactured goods: 83% of their total, 62% of all world exports;
* developing countries also export more manufactured goods than primary products: 56% of their total, 14% of world exports;
* more primary products are exported by developed countries than by developing countries: 14% of world exports, compared with 11% (Sutcliffe 2001: 71-75; UNCTAD 1999a).

See trade flows for more details on the size and destination of trade flows.

Changing fortunes of developed and developing countries

A country's share in the world export market represents one measure of its participation in the world economy and its purchasing power of imports. Although most developing countries increased their share of exports during the 1990s, the increase was highly uneven. The following describes major changes in trade patterns:

* from 1950 to 1970: developed countries gained in the share of total world exports, and developing countries lost;
* in the 1980s and 1990s: a group of developing countries in East Asia significantly increased their manufactured exports, and this increased their share of the world trade
* Latin America's share fell substantially from 1950 through 1990, and then began to increase slightly
* Exports from West Asia and North Africa fell since 1980, due to declining petroleum prices.
* There has been a historic decline in the exports of the Sub-Saharan continent. Its share of the world total has dropped from over 3 per cent in 1950 to barely 1 per cent in 1996. This has been largely due to the fact that Africa has not basically changed the products it exports, and that the prices of these products have tended to fall. (Sutcliff 2001: 76).

One alternative to globalized free trade is the creation of trade blocs which can manage and promote trade within geographic regions. Some developing countries that are skeptical of free trade prefer to participate in regional trade blocs which offer some protection against larger and more aggressive global trading partners.

Debates about Globalization and Trade

The topic of international trade raises many questions. Does trade globalization increase economic growth? Does globalization reduce poverty? Is it the case that the rich Northern countries are benefiting more from increased trade with the developing countries of the South? Are developed countries using their own forms of protectionism while asking developing countries to become increasing open? To explore these topics see the page on Debates about Trade and Development.

References

International Monetary Fund (IMF). (1996). Direction of Trade Statistics Yearbook 1996, Washington DC: IMF.

Organization for Economic Cooperation and Development (OECD), OECD Glossary of Stastical Terms. (2003).

Sen, Amartya. (1999). Development as Freedom. New York: Anchor Books.

Sutcliffe, Robert. (2001). 100 Ways of Seeing an Unequal World. London: Zed Books.

United Nations Conference on Trade and Development (UNCTAD). (1999). Handbook of Trade and Development Statistics 1996/1997. Geneva: United Nations.

United Nations Statistical Division, SITC. (2003).