● International trade is the exchange of goods or monopoly on trade.

It represents the antithesis

services across national jurisdictions. It of free trade since trade relations are controlled
encompasses both inbound trade (imports) and and aligned to benefit one partner at the
outbound trade (exports) and is subject to the expense of others.
regulatory oversight and taxation of the involved
nations, typically through customs. ● Absolute Advantage:
○ refers to a situation where a nation can
produce a good more efficiently or with fewer
1. FLOWS OF GLOBALIZATION resources than any other nation.
○ This concept, proposed by Adam Smith,
● The flows of globalization refer to the suggests that a nation should specialize in
movement of goods, services, and resources producing goods in which it has an absolute
across national jurisdictions. This includes both advantage and then trade with other nations for
inbound trade (imports) and outbound trade goods in which it has less efficiency.
(exports). The flows of globalization are subject
to regulatory oversight and taxation by the ● Comparative Advantage:
involved nations, typically through customs. ○ refers to a situation where a nation can
produce a good at a lower opportunity cost
● The conventional economic theory supports compared to other goods it could produce, or
the idea that international trade promotes compared to the production of the same good in
economic efficiency by providing a wider variety another nation.
of goods, often at lower costs. This is due to ○ This concept, proposed by David Ricardo,
specialization, economies of scale, and related suggests that even if a nation does not have an
comparative advantages. Additionally, absolute advantage in any specific good, it can
international trade is seen as a necessity when it still benefit from specializing in and trading the
enables a nation to acquire goods that would goods in which it has the highest comparative
otherwise not be available in a national advantage.
economy, such as energy, raw minerals, or
agricultural goods. ● Neomercantilism:
○ is a modern trade system that aims to
● Mercantilism is a trading system where a establish a positive trade balance to meet
nation aims to impose a positive trade balance economic development goals through control of
(more exports than imports, particularly the cost structure.
value-wise) on other nations to favor the ○ It often involves export-oriented strategies and
accumulation of wealth. This system was may include government incentives and
prevalent during the colonial era and often subsidies to confer additional advantages to the
undertaken by charter companies receiving a factors of production.
● Factor Endowments: 3. Integration of Services: The global economic
○ refer to the resources a nation possesses, system is characterized by integrated services,
such as capital, land, and labor. finance, retail, manufacturing, and distribution,
○ Nations will export goods that utilize their supported by improved transport and logistics,
abundant factor endowments and import goods and digital technologies.
that require resources in which they are scarce.
○ This concept underlines that trade is related to 4. Dominance of Economic Blocs: The
a nation's factor endowments, and it can be geography of international trade is dominated by
improved through investments in capital and large economic blocs, particularly in North
human resources. America, Europe, and East Asia, with a growing
share accounted for by developing economies,
These concepts are fundamental to notably China.
understanding the rationale for international These factors collectively shape the
trade and the strategies that nations employ to contemporary global trade system, influencing
maximize their economic benefits. the patterns and dynamics of international trade.

The three phases that articulate the emergence

of the current structure of global trade are as
2. THE SETTING OF CONTEMPORARY follows:
GLOBAL TRADE SYSTEM
1. First Phase (Immobile Factors of
The contemporary global trade system is Production):
characterized by several key features: This phase prevailed until the 1970s and was
characterized by a limited mobility of factors of
1. Dominance of Corporations: Global trade is production, such as raw materials, parts, and
primarily driven by corporations, with end finished products. Trade was mainly structured
products consumed by individuals. Nations by colonial relations and was fairly unregulated.
serve as regulatory and jurisdictional units
where trade data is collected. 2. Second Phase (Mobility of Factors of
Production): From the 1970s to the 1990s, the
2. Phases of Development: The current structure mobility of factors of production, particularly
of global trade has evolved through three major capital, became possible. This led to a better
phases, marked by technological realization of the comparative advantages of
advancements, regional trade agreements, and specific locations and the emergence of regional
the emergence of multinational corporations. trade agreements.
 agreement, such as a free trade zone, which is
3. Third Phase (Global Value Chains): This facilitated when partners have a common
phase is marked by the growth in international boundary.
trade, including a wide variety of services, and a 2. Country-Specific Factors: These factors are
surge in the mobility of the factors of production. endogenous and are related to the origin or the
The priority has shifted to the geographical and destination of trade. They include customs
functional integration of production, distribution, procedures (tariff and non-tariff factors), the
and consumption with the emergence of global overall performance of the national transport and
value chains. logistics sector, and how well an economy is
connected to the international transport system
These phases reflect the evolution of global through its gateways, such as ports and airports.
trade and the changing dynamics of international
economic relations over time. Several factors have been conducive to trade
facilitation in recent decades, including:
1. Integration Processes: The emergence of
3. TRADE COSTS AND FACILITATION economic blocks and the decrease of tariffs at a
● Trade facilitation involves improving the global scale through agreements have promoted
procedures regulating the international trade as regulatory regimes were harmonized.
movement of goods to make formalities more 2. Standardization: Setting a ubiquitous frame
efficient for the actors involved in international of reference over information and physical flows,
trade. It aims to reduce the general costs of which facilitates trade by ensuring reliability,
trade, including transaction, tariff, transport, and interoperability, and compatibility of goods and
time costs. This process enhances the services.
effectiveness of regulatory authorities and 3. Production Systems: The flexibility and
reduces the risk of customs duty evasion. Trade embeddedness of production systems, which
facilitation is crucial for promoting economic and favor exchanges of commodities, parts, and
social development by expanding human, services, and are facilitated by maintaining a
infrastructure, and institutional capabilities. network of geographically diversified inputs.
4. Transport Efficiency: The significant
Separation factors and country-specific factors increase in transport efficiency due to
are two key elements that influence international innovations and improvements in the modes and
trade: infrastructures in terms of their capacity and
1. Separation Factors: These are exogenous throughput.
factors that separate two trade partners, such as 5. Transactional Efficiency: The streamlining
distance, transportation costs, travel time, and of international trade transactions through the
common attributes shared by trade partners. reduction of documents and the simplification of
They can also involve being part of an economic transfer processes, which enhances overall
trade efficiency. These factors collectively implementation of protectionist measures and
contribute to the facilitation of international trade trade regulations.
by promoting economic integration,
standardization, production flexibility, transport 5. GLOBAL TRADE AT A THRESHOLD
efficiency, and transactional efficiency. ● Ongoing Growth of International Trade: This
trend refers to the continuous expansion of
4. GLOBAL TRADE FLOWS global trade, with the value of exports increasing
● The nature of international trade has evolved over time. Despite some fluctuations,
with the emergence of global value chains and international trade has shown a general upward
the trade of intermediary goods, reflecting the trajectory, reflecting the deepening integration of
strategies of multinational corporations. About economies and the expansion of cross-border
80% of global trade takes place within value economic activities.
chains managed by multinational corporations.
International trade has grown at a faster rate ● Containerization of Commercial Flows:
than global merchandise production, with the Containerization involves the use of
growing complexity of distribution systems standardized containers to transport goods,
supported by supply chain management which has revolutionized the shipping industry
practices. The structure of global trade flows has by streamlining the movement of cargo. This
shifted, with many developing economies having trend has led to increased efficiency, reduced
a growing participation in international trade with costs, and facilitated the globalization of trade by
an increasing share of manufacturing. enabling seamless transportation of goods
across different modes of transport.
● The shift in the structure of global trade flows,
with many developing economies participating ● Concentration of Finished Goods Exports:
more in international trade and increasing their This trend highlights the growing significance of
share of manufacturing, is related to finished goods in international trade. It reflects
neo-mercantilism. the shift towards the exchange of higher
value-added products, such as electronics,
Neo-mercantilism involves export-oriented automobiles, and machinery, as opposed to raw
economic development policies, which many materials or intermediate goods.
developing economies have pursued. This
strategy is associated with growing imbalances ● Higher Relative Growth of Trade in Emerging
in international trade, particularly in the container Economies: Emerging economies, such as
trade structure. Therefore, the changing nature China, India, and Brazil, have experienced a
of global trade flows reflects the pursuit of notable increase in their share of global trade.
neo-mercantilist strategies by some This trend underscores the rising importance of
governments, which can lead to the these economies as key players in international
commerce, contributing to the rebalancing of global trade flows has shifted, with many
global trade dynamics. developing economies participating more in
international trade and increasing their share of
● Growing Role of Multinational Corporations: manufacturing.
Multinational corporations (MNCs) have played 3. Impact of Multinational Corporations:
an increasingly influential role in shaping global Multinational corporations play a significant role
trade flows. These entities operate across in shaping global trade flows, particularly within
borders, engaging in complex supply chains and value chains managed by these entities.
production networks, and have contributed to
the expansion of international trade through their 4. Technological Changes: Automation and
global operations and investments. robotization are impacting manufacturing
These trends collectively illustrate the evolving systems, influencing input costs and productivity,
landscape of global trade, characterized by which in turn affect international trade dynamics.
increasing volumes of trade, transformative
transportation practices, changing trade These points and challenges collectively
patterns, the rise of emerging economies, and underscore the complex and evolving nature of
the impact of multinational corporations on global trade, influenced by demographic,
international commerce. economic, and technological factors. The global
business of growing organizations refers to the
Challenges: expansion of businesses on an international
1. Demographic Changes: The aging scale. This expansion is driven by the need to
population in developed economies and adapt to the complex, interdependent, and
demographic shifts in regions like North dynamic global business environment. Growing
America, Europe, and East Asia pose organizations aim to adjust their strategies and
challenges to consumption patterns and the management styles to operate in various regions
drivers of global trade. of the world, both directly and through alliances
or partnerships. The focus is on growth and
2. Supply Chain, Energy, and Environmental sustainability through global operations, with an
Issues: Demographic changes, politics, supply emphasis on producing specialized goods for
chain complexities, energy demands, and international markets and accessing
environmental concerns impact future international networks, human resources, and
developments in international trade and financial markets. The document also highlights
transportation. Main Points: 1. Ongoing Growth the impact of economic, social, and cultural
of International Trade: The value of exports has changes on organizations, as well as the
grown significantly, but the growth appears to be challenges and opportunities presented by
leveling off about global national income. 2. global business.
Changes in Global Trade Flows: The structure of