MENDOZA, Saramay C.

Global Trade

I. SUMMARY:

WORLD TRADE GROWTH SLOWING

Global trade is also known as international trade it is simply the import

and export of goods and services across international boundaries. Trade
allows country to specialize and promotes healthy competition. Trade
depends on mix of demand and supply in different countries. In September
27 of the year 2016 the World Trade Organization predicted that the GDP for
trade of goods will be 2.8% but implicitly it turns out to be 1.7% which
happens for the first time in 15 years placing the global trade in a not so
good position or in a worrying kind of state; the cause could be depressed
economies and bunged up protectionism. However, in 90s up to early 2000s
the growth on the global trade was unnaturally high, two factors added to
the momentum during that period which are the falling cost of business and
Chinas entry to the global trade. Lower costs encouraged web of supply
chains to form while chinas entry with spectacular economic growth drove
over huge increase in investment. As of 2016, the process may have run its
course meaning that the costs are not falling as quickly as before and china
switches to a more consumption-led approach to economic growth which will
cause naturally slow growth in trade volumes. There has been analysis made
by the World Economic Outlook in October of 2016 which sorts out the
factors affecting the slow growth in global trade, the analysis fins out that
the main culprit for such state was the worlds general economic funk
wherein the IMF expects global GDP to grown at 3.1% in 2016 but markedly
slower than the 3.4% enjoyed last two years ago. The slowdown is cause by
weak global demand. If the growth in investment is weak it can particularly
drag advanced and emerging economies, other factors such as protectionism
plays a smaller role or effect for such slow growing state. This slow growth in
global trade frustrates policymakers but it is not a hopeless case though it
would be hard to boost demands it is not impossible to do so. The GDP and
trade fed off one another. In order to start a virtuous cycle, one way to do
this is to ratify and implement global or international agreements such as the
Trans-Pacific Partnership between America and 11 other countries around the
Pacific Rim, or the Regional Comprehensive Economic Partnership; these kind
of deals and agreements cannot be done overnight, in order for these deals
to come to light it requires political will and a lot of convincing to do for
disgruntled electorates but if politicians really want to boost trade, they
should start by trumpeting virtues.

II. FIVE FACTORS AFFECTING THE GROWTH OF WORLD TRADE:

1. Protectionism
Protectionism is a theory or practice wherein countrys
domestic industry place taxes on imports. Doubt can
spring from interdependence when it comes to
interconnected growth and progress. Given the fact that
there is a clear disparity between the wealth and
influences of states, it is no surprise if states become
uncertain and skeptic when it comes to unified effort for
global progress. Queries whether global or regional trade
will be beneficial can arise as it questions the profit and
advantage that states will reap in the movement and
thats where protectionism starts. The idea of wanting
absolute advantage and putting your states interest high
above anyone else without making compromises
eventually leads to isolation which ultimately makes
economic growth stagnant.
2. Chinas Transition
when China switches from investment to a more
consumption-led approach to economic growth causing the
trade in volumes in being naturally slow. Investment led
approach meets the interest of both the country and the
global trade while consumption-led approach focuses on
the interest and growth of the domestic or local market.
China can go from being a net lender to a net borrower
from the rest of the world hence, this scenario only can go
either way it could lead to extremely positive outcome or it
will lead us to a global recession. If Chinas economy grows
far higher than expected it can become solely dependent
on its own and it wouldnt need international trade or
 wouldnt look for international market anymore. China is a
huge market and plays a vital role in the international
market; if the global trade loses the demand of China, the
global trade could enter great devastation and decreasing
growth.
3. Falling cost of business
lower costs encouraged a web of supply chains to form, so
that parts that were previously manufactured domestically
could be shipped and assembled in foreign countries. Now
that costs are not falling as quickly, the process may have
run its course.
4. Weak Global Demand
weak investment growth is a particular drag in both
advanced and emerging economies. The demand
eventually sets as the catalyst for economic integration
production would be meaningless without guaranteed
consummation. Thus in return, weak global demand
stagnates global trade as if taking away one pillar and
foundation for stable economic growth.
5. Worlds General Economic Funk
Progress can be unpredictable in a way that it might move
forward and backwards as well. Take the GDP expectation
of the International Monetary Fund as an example; the IMF
expects global GDP to grow at 3.1% in 2016, markedly
slower than the 3.4% enjoyed two years ago. Situations
vary from day to day, regimes changes, trends transition
and economic global economic growth is no exception. Add
the fact that todays world is about to enter an unknown
period with the rise of populist leaders across the world it
will come as no surprise if the world were to experience a
couple of downfalls and collapses on its way to integration.
Wed also have to remember that the world is no stranger
when it comes to economic funks it has happened before
and there is no way that it might not happen again. Global
economic funks happen in a blink of an eye whether it is
due to failed investments, failed international cooperation
or differences in ideals.
III. IDENTIFY THREE FACTORS AND PROVIDE HOW THESE FACTORS CAN
BE IMPROVED:
a) Chinas Transition
Make a trade deal under discussion that includes India and
China wherein it is for the best interest for the country
itself and also for the growth of global trade. Given the
large population of China and its broad economic influence,
power and sphere, it is indeed no surprise if its economy
can serve as a catalyst for global trade. If China were to
isolate itself and goad its policies towards a more self-
centered trade deals, this could mean as a bad news in
global economic sphere as many countries rely on its
economy as well. Therefore, it is important to establish
effective trade deals that shall encompass both the states
interest and global progress as well.
b) Weak Global Demand
Boosting demands sounds nice but takes a lot of hard work
and one way of doing so is ratifying and
implementing international agreements to lower trade
barriers. Weak global demand often springs from strict
trade barriers which essentially gives states the idea of
reaping unsatisfactory and unequal benefits to states
involved. States, by no means, have disparity in both
wealth and influence in the global sphere. And with todays
system, states often build a faction in order to integrate
economic growth and drive progress even further. This can
be one of the solution in order to strengthen global
demand strengthen regional and international
cooperation. Take EU for example. The European Union has
one of the most successful economic regional integration
which eventually became a deciding factor for the member
states of the union to be not only of the top richest
countries across the globe but influential as well. If we take
this as an inspiration and aspire to promulgate
international agreements that will transcend borders and
reach the global sphere, the chances for greater global
demand and progress will increase as well. It is indeed true
that it would be a greater challenge but it is important to
remember hard work reaps greater reward not only for
states as an individual but as a whole as well.
c) Protectionism
Given the fact that the world is indeed progressing towards
interconnectedness and interdependence despite of
differences; todays modern era has defined economic and
political ideals as two different spheres which will
eventually co-exist. The world is indeed going towards a
different direction far from what professionals has expected
centuries ago. In the past, ideals come pair by pair:
authoritarian states sought for strict trade and realist
economic ideals while liberal states sought for free-trade
enterprise and laissez faire policy. This is far too different
from todays principles and paradigms which absolutely
separate economic ideals from political ones which is why
even an authoritarian state such as China and Russia still
pursues a liberal economic ideal despite of its dictatorial
regime. In other words, the world seems to cope up with
the idea of progressing through free enterprise despite the
difference in political ideals in the realization that it is not
only beneficial for global progress but in their personal
interest and growth as well.