Inter national trade Essay Example | Topics and Well Written Essays - 2500 words

Inter national trade - Essay Example International trade is in principle not different from domestic trade as the motivation and the behavior of parties involved in a trade do not change fundamentally regardless of whether trade is across a border or not. The main difference is that international trade is typically more costly than domestic trade. (Cited from Wikipedia) The reason is that a border typically imposes additional costs such as tariffs, time costs due to border delays and costs associated with country differences such as language, the legal system or culture. Another difference between domestic and international trade is that factors of production such as capital and labor are typically more mobile within a country than across countries. Thus international trade is mostly restricted to trade in goods and services, and only to a lesser extent to trade in capital, labor or other factors of production. (Cited from Wikipedia)Then trade in goods and services can serve as a substitute for trade in factors of produ ction. Question 1 The table obtained from the World Trade Organization in 2010, showed International Trade Statistics-Growth in the volume of world merchandise exports and production 2000-2007. The percentage for world merchandise exports during 2005-2007 was fluctuative, with the highest growth recorded in 2006. Agricultural products started off steadily but suffered a decline in 2007. Fuels and Mining Products were consistent in its growth over that same period. Manufacturers showed its highest growth in 2006, whilst world merchandise production was consistent but showed a marginal increase in 2007. Agriculture was fluctuating similarly to Mining which suffered a nil growth in 2007. Manufacturing was consistent until its marginal increase in 2007. Lastly, the World GDP got a marginal increase over the last two years. Four factors which may have contributed in the growth in world exports include; Industrialization, advanced transportation, globalization and multinational corporatio ns . Industrialization may be defined as the process in which a society or a country transforms itself from a primarily agricultural society into one based on the manufacturing of goods and services. Individual manual labor is replaced by mechanized mass production and craftsmen are replaced by assembly lines. (Industrialization, Anon, 2011) Characteristics of industrialization include the use of technological innovation to maximize production efficiency in order to increase economic growth. The growth of the amount of freight being traded as well as a great variety of origins and destinations promotes the importance of international transportation as a fundamental element supporting the global economy. Economic development in Pacific Asia and in China in particular, has been the dominant factor behind the growth of international transportation in recent years. Since the trading distances involved are often considerable, this has resulted in increasing demands on the maritime shippi ng industry and on port activities. International transportation systems have been under increasing pressures to support additional demands in freights volume and the distance at which this freight is being carried. This could not have occurred without considerable technical improvements permitting to transport larger quantities of passengers and freight, and this