International Trade and World Output
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Published: Mon, 5 Dec 2016
Trade is often represented as terms of GDP, gross domestic product and trade and the world output are closely related to each other. The pattern of trade keeps evolving due to changes of demand and supply, industrialization of each country, labor productivity, the movement of the price, income convergence and specialization of each nation. Today traded services are growing faster than in business of traded goods while agricultural products tend to be declined. The main both export and imports counties with U.S. are Canada, Mexico, and China. The major exports and imports of U.S. are capital goods, industrial supplies, foods and beverage consumer goods, and automotive vehicles and China’s largest exports and imports are electrical machinery and equipment, power generation equipment, apparel, iron, and furniture.
The Relation between Trade and World Output
The trade and the world output are closely linked to each other. Trade is often represented as terms of GDP, gross domestic product, and also is influenced by nations’ economic, political, and social elements. When it comes to international trade, all factors of outsourcing, multinational business and industrialization characterize trade system. In general the trade volume has similar patterns with the international trade; when total output raises, international output increases accordingly. “Slower world economic output slows the volume of international trade, and higher output propels greater trade.” (Wild, Wild, Han, 2006) Trade shows tendency of slowing down in economic recession and business is less likely investing money and consumers are more likely trying to save money and purchase less of either of domestic and imported goods. If one country goes into recession, it will bring decreasing the value of their monetary system and it will make imported goods more costly and domestic goods more reasonable price. Imported goods are relatively expensive compared to domestic goods because of as goods are passed over the countries; it generates additional costs such as tariffs, transportation fees, labor fees, and taxes. The present day the volume of trades tend to increase faster than world output and some suggestion is that price of traded goods are getting lowered over the time compared to domestic goods.
Pattern of International Trade
The pattern of trade keeps evolving due to demand and supply basically, industrialization of each country, labor productivity, and movement of the price in the international markets. It also shows certain trade patterns in income convergence and specialization of nations. Trades between wealth counties take 60% of whole international trade while trades of comparably low income countries take only about 6% of international trade (Wild, Wild, Han, 2006).
According to WTO report, main pattern of international trade is that industries in traded services are growing faster than in business of traded goods (WTO, 2004). Also, agricultural products tend to be declined while trade of processed products is more developing (WTO, 2004). The principal imports of industrialized nations are primary goods and raw materials, such as oil, coal, and iron while they exports manufactured products, such as computer or machine. In contrast, nation that is in the stage of developing has tendency of importing manufactured products that they can’t make on their own and exporting agricultural products, such as wheat or cotton they produced. They provide each other things in which they are specialized at. In order to produce agricultural goods, machine and equipment are needed and raw material is also essential for nation that can’t produce on their own.
Imports and exports of the U.S. international trade in goods and services show certain patterns and balance. According to the U.S. Census, total amount of imports of the U.S. is always higher than exports in both goods and services; imports was about $200 billion and exports was about $160 billion in November 2010 (U.S. Census, 2010). Exports in consumer goods, such as food and beverages, increased while auto and machines decreased relatively. In 2010 the U.S. exported goods to China about $81,700 million and imported about $334,000 million, which is approximately four times than exports (U.S. Census, 2010). The top volume of the U.S. exports and imports from China is same, which is electrical machinery and equipment (U.S. Census, 2010). Besides of machinery, the U.S. mainly exports to China oil seeds, spacecraft, and plastics while second largest imports are apparel and toys (U.S. Census, 2010).
If All Trading Stops, What’s Next?
The main export and imports counties with the U.S. are Canada, Mexico, and China (U.S. Census, 2010). And, according to the U.S. Census, major exports and imports of the U.S. are capital goods, industrial supplies, foods and beverage consumer goods, and automotive vehicles (U.S. Census, 2010). The largest volume of imports of each category is fish and fruits in foods, petroleum products and crude and fuel oil in industrial supplies, computers and industrial machines in capital goods, and pharmaceutical preparation and apparel in consumer goods (U.S. Census, 2010).
As mention above section, the U.S. imports about $40 billion more than the exports and it causes deficit in trade. If all trading between nations stops, the U.S. will have hard to get goods and services listed above. Some imported goods and services are we can live without or can produce in the U.S., however some of them are essential and we can’t live without. If the U.S. is not able to get any of crude oil and pharmaceutical preparation, which are major imports, it will bring huge chaos. As U.S. department of energy states, the largest imports of the U.S. from other nation are crude oil (U.S. Department of Energy, 2010). Most of petroleum are produced by Saudi Arabia and Russia and the U.S. generates only about 50% of the crude oil that was used in 2009 (U.S. Department of Energy, 2010). One civilized nation would not be able to live without crude oil. If all international trade stops, people in the U.S. are unable to get any of foreign luxury cars, such as Lamborghini, Mercedes, or Lexus. Women would have to live without shoes and handbags made from Italy. Second largest imports of the U.S. are medicinal and pharmaceutical preparation and it takes approximately 40% of the U.S. market (U.S. Census, 2010).
China is the fastest growing economy in the world and second largest economy after the United States. Also, China has the highest volume of exports and second highest volume of imports in the world. China mainly exports to the U.S., Hong Kong, Japan and South Korea while imports largest volume from Japan, South Korea, Taiwan, and the U.S. (U.S. Census, 2010).
According to US-China Business Council, China exported about $1,201 billion and imported about $1,005 billion in 2009 (US-China Business Council, 2009). Top exports are power generation equipment, apparel, iron, and furniture while largest imports are electrical machinery and equipment, mineral fuel and oil, and ores in 2009 (US-China Business Council, 2009). The largest imported goods in China, such as machinery and equipment, with high technology, and advantages of supply chain recognized major contribution to China to become second largest market in the world. Now one of their main exports became also electrical machinery, however if all trades would cutoff and can’t get any of imported high technology machinery, China has to develop their own technology that costs lots of time and money. Even though China was ranking top five producing crude oil in 2009, they can’t provide all needs in China; therefore it would affect mobility and industry also (U.S. Department of Energy, 2010).
The pattern of international trade keeps changing and evolving and is influenced by nation’s social pattern, labor mobility, and price in the market. And main pattern is that industries in traded services are growing faster than in business of traded goods. Imports and exports of the U.S. show certain patterns and balance and total amount of imports of the U.S. is always higher than exports in both goods and services. Major imports of the U.S. are crude oils, pharmaceutical preparation, and industrial machine while China mainly imports electrical machinery and equipment, mineral fuel and oil, and ores. Every county are interdependent to each other.
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