Recent Trends in World Trade
1.1 RECENT TRENDS IN WORLD TRADE
1.1.1 The volume of trade flows
Trade as an engine of growth
Trade has been a common activity since the Stone Age. From exchanging animal furs for grain, to the development of currencies and the first bonds in the Middle Ages, trade has increased throughout history along with transportation improvements. Trade development gained a new impetus after the Industrial Revolution. Between 1720 to 1971 world trade increased 460 times or 2.7 percent annually.
Between 1948 and 1997, trade grew at an annual rate of 6 percent while world production only increased at 3.7 percent per annum. The ratio of imports and exports to GDP in developed and developing countries increased from 17 percent to 24 percent and from 23 percent to 38 percent respectively between 1985 and 1997. Trade also increased at a faster annual average rate than the world economy. The latter grew annually at a rate of 3.1 percent and 2.0 percent during 1980-90 and 1990-95 respectively while trade increased by 5.3 percent and 6.8 percent over the same periods. The increase in trade has been accompanied by a shift from bulk commodities to more processed commodities which have a greater share of value-added.
Figure 1: World trade and industrial production growth rates
Source: Rostow,W.W. 1978.
Reasons for strong trade growth
Several reasons explain this increasing trend: * one explanation for this dramatic increase of trade is the extraordinary breakthroughs that occurred in transport, communication and information technologies. The new technologies made trading easier and reduced considerably trading costs. For example, between 1930 and 1960 the cost of air transport fell by more than 80 percent and that of telecommunications by more than 98 percent. The reduction in the cost of computing was comparable between 1960 and 1990; * this increase is also the result of intense and lengthy negotiations to improve the trading environment. Negotiations have taken place
1.1.1 The volume of trade flows
Trade as an engine of growth
Trade has been a common activity since the Stone Age. From exchanging animal furs for grain, to the development of currencies and the first bonds in the Middle Ages, trade has increased throughout history along with transportation improvements. Trade development gained a new impetus after the Industrial Revolution. Between 1720 to 1971 world trade increased 460 times or 2.7 percent annually.
Between 1948 and 1997, trade grew at an annual rate of 6 percent while world production only increased at 3.7 percent per annum. The ratio of imports and exports to GDP in developed and developing countries increased from 17 percent to 24 percent and from 23 percent to 38 percent respectively between 1985 and 1997. Trade also increased at a faster annual average rate than the world economy. The latter grew annually at a rate of 3.1 percent and 2.0 percent during 1980-90 and 1990-95 respectively while trade increased by 5.3 percent and 6.8 percent over the same periods. The increase in trade has been accompanied by a shift from bulk commodities to more processed commodities which have a greater share of value-added.
Figure 1: World trade and industrial production growth rates
Source: Rostow,W.W. 1978.
Reasons for strong trade growth
Several reasons explain this increasing trend: * one explanation for this dramatic increase of trade is the extraordinary breakthroughs that occurred in transport, communication and information technologies. The new technologies made trading easier and reduced considerably trading costs. For example, between 1930 and 1960 the cost of air transport fell by more than 80 percent and that of telecommunications by more than 98 percent. The reduction in the cost of computing was comparable between 1960 and 1990; * this increase is also the result of intense and lengthy negotiations to improve the trading environment. Negotiations have taken place
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