The relation between trade and world output
World output and international trade are closely related and since, we have a global market we feel both their positive and negative effect in tandem. Considering a particular year, the total sum of international trade that takes place directly affects the quantity of world output. The overall capacity of international trade will be slowed down if there is a decrease in world output and inversely, high output rates acts as a boost increasing trading volumes worldwide. Thus, if our global market is resourceful there will be an increase in world output too. As a result during economic recessions a negative atmosphere is created since, people spend and purchase less imported and domestic products as they would have normally.
Just like an economic boom increases world output, increasing international trade, during recession consumers become unsure about their individual and financial future and spend less. In addition, with increase in trade the efficiency of the sellers also increases as they become more capable and get more money and resources for investment, which further increases the overall world output. If one country trades with another obtaining services and products at a much cheaper rate than producing it themselves and trade them with a service or product of their own, they not only profit but also increase the output, as they are more efficient. Moreover, fluctuations in currency of a country during recession effects trade and import since the value of the currency are diminished leaving them unable to get imports, which are more costly than domestic items (Brahm, 2000).
The broad pattern of international trade
Normally, trade patterns are generated by observing world output and quantity of international trade and it provides an understanding of our probable future growths but unfortunately, this cannot tell us about the two parties actually involved in trading with respect to the high, mid and low income economies. Through the various informative records of the custom agencies we know that countries having wealthy economies and higher income rates constitutes for almost 60% of international trade whereas the middle and lower income economies constitute for around 34% of international trade. However, trading among the lower and middle-sized economies is about 6% of the total quantity of international trade. We need to know these figures in order to determine which economies are trading among themselves. This data is significant since it helps the nations to understand if considerable amount of trading is taking place among the poorest and the richest economies of our world (Brahm, 2000).
This also helps to verify whether considerable amount of trading activities take place in the poor economies or not. The broader patterns of the international trade sometimes also include the various practices, which take place during exchange of goods, services and capital assets over our international boundaries. Since we do not have an authentic technique for documenting the broad patterns of international trade, precisely, custom agencies in various nations provide us with a broad trade pattern which help the nations incase of discriminations. However, at times this information could be misleading since some of the governments knowingly modify the reports on trade, like sensitive information related to army equipment and other materials. In addition, the various products, which are sold through the black markets sometimes, provide us with a limited knowledge about the different trading economies of the world (Mayer, 2004).
If the nations of the world were to suddenly cut off all trade with one another then USA would no longer be able to obtain products like dried nuts and fruit, various herbs and spices, tropical vegetables and fruits, like papayas, mangoes and bananas, both processed food, like pulp, concentrates and fruit juices, and fresh ones, tea, cocoa and coffee. We would also not be able to get special ales and beers, such as German Lagers. Foreign automobiles, like Jaguar and Ferrari, would also not be available for us. We also would not have access to electronic devices and gadgets, like mobiles, video players and TV sets. We would not be able to buy leather, silk, designer clothes, accessories, handbags and shoes.
On the other hand, if, say, France stopped its international trade with USA then they would have to do without American automobiles, like Cadillac or Ford Mustang. They would also have to do without certain brands of meat, like Angus beef. Everyday food items, like cereal and its equipments would also not be available. In addition, USA is the largest exporter of electrical appliances, apparatus and machinery, which would not be available for France if they were to stop all trade (Brahm, 2000).
Trading has very high significance in our universal infrastructure. In its absence, most of our leading and economically rich nations would have to endure many losses. Most of our luxuries, which are indispensable and every nation take them for granted will become unavailable for us. Our choices will be narrowed and at certain times, we will not have any alternatives at all. In addition, trade is significant for our world economy since in its absence most of the poorer countries will have no proper income source (Scoppola, 2001).
- Brahm, R. (2000). National targeting policies, high-technology industries, and excessive competition. Strategic Management Journal. 16, 71-91.
- Mayer, F. W. (2004). Domestic politics and the strategy of international trade. Journal of Policy Analysis and Management. 10(2), 222-246.
- Scoppola, M. (2001). Trade policies and the strategies of multinationals in the international grain market. Agribusiness. 9(3), 189-204.