Did you know that the month of May is dedicated to celebrating the growth of world trade? Trade has been a core part of civilization for thousands and thousands of years. Historically, spices, textiles such as silk, and metals were some of the most commonly traded items. However, trade has evolved greatly due to technological advances over the years. Boats, automobiles, shipping containers and trade agreements are just a few things that have increased opportunities to conduct business across international borders. With more than 95% of the world's consumers living outside of the U.S., global trade is important to the growth of our nation as well as the continued improvement of the global economy.
World trade has not always been regulated, which created disadvantages for some businesses. However, over the years, political leaders realized the importance of free trade and have taken steps to level the playing ground. For example, the reduction of import restrictions and the signing of free trade agreements between nations has encouraged trade across borders.
The World Trade Organization (WTO) was established in 1995 by the Uruguay Round negotiations, and governs world trade in an effort to create a fair global marketplace. The WTO headquarters are located in Geneva, Switzerland and the organization includes 162 signatory countries.
The WTO administers trade agreements, moderates trade negotiations, handles trade disputes, monitors national trade policies, provides technical assistance and training for developing countries and facilitates cooperation between other international organizations.
Previous to the WTO's establishment, global trading increased at a gradual pace, followed by a strong rise in the early 2000's. With the global economic crisis in 2008, the gains of previous years took a sharp downward turn and only in recent years has there been a moderate recovery.
Modern world trade can be sub-divided into two categories: goods and services.
Goods are commodities, or tangible items which are sold and transferred to the buyer. Services, on the other hand, do not transfer ownership and cannot be stored or transported. Typically, the broad term of services encompasses professional and specialized services in the technological and financial industries.
According the OEC (Observatory of Economic Complexity), the 10 most traded products by dollar amount are:
- Crude Petroleum ($1.38 T)
- Refined Petroleum ($866 B)
- Cars ($700 B)
- Integrated Circuits ($498 B)
- Petroleum Gas ($428 B)
- Computers ($394 B)
- Vehicle Parts ($362 B)
- Packaged Medicaments ($353 B)
- Gold ($321 B)
- Broadcasting Equipment ($257 B)
Source of Above Graphic: World Trade Organization
China is the largest generator of exports in the world. According to the Central Intelligence Agency's World Fact Book, China exported $2.27 trillion worth of goods in 2014.
As the second largest export economy in the world, the United States set a record for annual exports for the fifth straight year. According to the U.S. Commerce Department, American businesses exported 1.64 trillion worth of goods in 2014. Total exports accounted for 13.4 percent of total GDP, compared to 7.5 percent 30 years ago.
U.S. jobs supported by exports also produced record numbers in 2014. Jobs directly related to exports totaled 11.7 million. Those export supported jobs pay on average between 13-18 percent higher wages than non-export supported jobs.
NAFTA (North American Free Trade Agreement) is just one testament to the success of free trade agreements. By the tenth anniversary of NAFTA, the U.S. had increased exports to Mexico and Canada by 85 percent.
The month of May is devoted to celebrating the success of world trade. Cities across the country will also hold World Trade Day's throughout the month of May. For example, on May 19, the Kansas City Chamber and World Trade Center: Kansas City will host 'World Trade Day 2016 Wake Up to Global Trade: Showcasing the Value of Exports' to celebrate the community's international business.
The future of world trade looks bright. With an increasing amount of tools such as the International Trade Administration's Free Trade Agreement (FTA) Tariff Tool, the new exporter online resource guide and the U.S. Department of Agriculture Trade Lead System, exporters can be well equipped to enter a new market. Additionally, services such as the Import-Export Bank and the National Export Initiative provide exporters with financing and market research to prepare them for export success.
Contact Marisol International for more information about importing and exporting.