International Trade Essay

3175 WordsJan 29, 201213 Pages
The answer to the fundamental question Why has world trade grown? remains “surprisingly disputed” (Baier and Berghstrand, 2011:1). Discuss the relative effects of transport-cost reductions, tariff liberalisation and income convergence on the growth of world trade. Support your discussion with appropiate figures and /or tables and industry examples. 1. Introduction. In the last decades there have been significant developments in the world trade and these have brought many benefits to all the parts implicated. There is no doubt than in recent years the numbers of trucks, planes and ships has increased significantly and has led to an increase of the world trade. Some people argue that these changes have been very benefitial for our society because this growth has brought employment, economic growth benefits, disolutions of international boundaries, trade agreements between countries, removal of tariff barriers and the world communications currently are much easier than ever. However, this growth is not exempt of some risks and the current situation is unlikely to change in the near future unless certains actions are taken. 1. Background. World Trade can be defined as the “free exchange of capitals, goods and services between countries and there must be a economic interaction between the nations involved, that is, exports and imports” (Jason C.H. Chuah, 2009: 1) . It is difficult to imagine another activitie more relevant to the prosperity of a country than international trade. The exchange of goods and services generates the movement of capital, and this is vital for the economies to remain stable. Although there have been some difficulties due to the globalisation, world trade continue being a key element for the economic success and development. One of the main guiding of world trade is “comparative advantage” (Krugman and Obstfeld, 2009:

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