Global trade has shown a consistent rising trend since World War II. Most notably, from 1950 to 2017, the global export volume of trade goods increased from US$62 billion to about US$18 trillion. As this year marks the beginning of a year-long commemoration of the World Trade Centers Association’s 50th anniversary, the organization’s milestone offers an excellent opportunity for us to take a look at some of the global trade trends that have brought us to where we are today.
Burgeoning Intraregional Trade
Founded in 1993, the European Union, which grew out of the European Economic Union (1957), has long since broken down trade barriers among its current 28 member states. It’s a shining example of how a dynamic regional common market can help boost trade and economic growth. Similarly, the ASEAN Free Trade Area, South America's Mercosur, and the North American Free Trade Agreement all took strides to ease and promote trade among regional trading partners.
Today, Africa is poised to become the latest region to take full advantage of the benefits of intraregional trade. As African policymakers are long proponents of cross-border trade, there are government officials ready and willing to turn these efforts into a reality. Specifically, the African Economic Community was established in 1991 to create free trade by 2020 and an African Common Market by 2023. While the continent’s intraregional trade remained stagnant throughout the early-2000s, efforts have picked up in more recent years. Last year, 44 African nations signed the Continental Free Trade Agreement and committed to reducing tariffs on 90 percent of goods. This pact represents the most significant free trade zone agreement since the creation of the World Trade Organization (WTO) in 1995 and could be the precursor to vibrant internal and external trade in Africa.
Trade Liberalization: The Asian Tigers
The liberalization of markets has been an unabating trend over the past five decades. Bilateral trade has become common, and the majority of preferential trade agreements are now between emerging economies, enabling those countries to leverage their competitive advantages.
In 1970, only Japan and four other newly-industrializing Asian economies (Hong Kong, Singapore, South Korea, and Taiwan) had trade-oriented development strategies. However, by 1990, almost all of East Asia had enacted major trade and investment liberalizations. According to the Asian Economic Integration Report in 2018, Asia expanded its trade by 7.1 percent the previous year, marking the highest levels seen since 2011. In comparison, trade volume in the U.S. expanded by 4.1 percent, and trade volume in the EU expanded by only 2.9 percent. (NOTE: This data comes from calculations made by the Asia Development Bank using data from the International Monetary Fund’s World Economic Outlook April 2018 Database and the World Trade Organization’s Statistics Database.)
Robust domestic and cross-border investments are both factors that have contributed to Asia’s economic strength. The region has particularly benefited from the cross-border exchange of parts and components, as well as a shift in the types of goods manufactured. For example, China’s exports leaned more towards textiles, apparel, and appliances 10 years ago. However, with the rise of smartphones and tablets in recent years, it has since focused more on electronic equipment.
Advances in Transportation and Logistics
Coupled with new technologies, advances in transportation and logistics are leveling the playing field, enabling emerging countries to compete against larger economies. In fact, logistics is now a US$4.3 trillion industry affecting nearly every country in the world.
Supply chains have also become more dispersed across the globe. While many modern products are designed with aesthetics in mind, engineers are now, more than ever, concerned with how goods will be transported. For example, rectangular containers are replacing cylindrical ones to save space and to make pallet stacking more efficient.
Further, new navigational technology, improved ports, and the advent of supertankers have lowered transportation costs. Advanced shipping container designs now enable some ships to carry more than 19,000 standard containers. Many high performers in logistics are members of the Organization for Economic Co-operation and Development (OECD) rather than G10 superpowers. According to the World Bank, India, Indonesia, Vietnam, and Cote d’Ivoire are all top trade competitors — partly because they have access to the sea or are close to major transportation hubs.
Reshaping Global Trade
Many transformations have reshaped global trade over the past 50 years. Countries are tapping emerging markets, nurturing intraregional trade, and leveraging their competitive advantages. This interactive visual on global trade patterns by Harvard University’s Center for International Development is a reminder of the growing complexities of global trade — and the various opportunities it offers.