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Global Interdependence

Trends in Global Trade

Graph of World Merchandise Exports sourced from the World Bank, used under an Open License.​

Graph of World Merchandise Imports sourced from the World Bank, used under an Open License.


Growth in Trade

From these graphs, we can conclude that growth in merchandise trade began to pick up during the 2000s. This was mainly evident as the world gradually removed protectionist policies after the wars, more notably the cold war. Trade was encouraged as a way to increase economic prosperity as well as develop political ties and peaceful outcomes between countries.In addition, new technologies, such as the internet, made it easier to communicate and link overseas buyers and sellers. 


Growth in trade has been encouraged by:

  • Trade organisations, such as the World Bank, World Trade Organisations and the OECD

  • Growth of Free Trade Agreements, such as Australia's free trade agreements with China, Japan and Korea

  • Industrialisation and specialisation of countries, such as those of Japan post war and China after the introduction of more capitalist policies

  • Multinational Corporations developing global value chains, that is when components are sourced from multiple locations in multiple countries, assembled in a centralised location

  • Advancements in technology, such as the internet

  • Advancements in transport technology, such as more efficient and reliable aeroplanes and cargo ships.

The Global Financial Crisis

It's unsurprising that global trade fell during the GFC (2007-2008). Many major economies experienced a recession, resulting in many economies slowing their production of exports and having insufficient income to maintain the level of imports.


Recent Downturn in World Exports and Imports (2013-2016)

World exports and imports of merchandise trade fell after 2012, as China's economy slowed again. After the GFC, the government responded with massive government spending, continuing to build infrastructure. Eventually, after 2012, the government has slowed down its spending, resulting in a fall of world trade. China's downturn, created a chain effect, with other countries experiencing a downturn, once again slowing world trade.



World Trade as a Percentage of World GDP

Graph of Merchandise Trade as a % of GDP sourced from the World Bank, used under an Open License.​

From the graph above, world trade as a % of GDP, tends to follow the overall trends in merchandise trade values. Currently, merchandise trade makes up 45% of the world GDP, a growth of 125% since 1970, where trade only accumulated 20% of world GDP. This shows the overall trend in globalisation, where economies are becoming more integrated and inter-dependent upon one another. The slowdown of the GFC, which started in the US, decreased world trade by 19%, from almost 52% in 2007 to 42% of World GDP 2008. The continuing decline in major economies has evidently seen the world trade become sluggish in recent years. 

If one major economy experiences a slowdown, world trade will also decrease, likely decreasing world economic growth.

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