Global trade dates back thousands of years, to when horses carried goods around Central Asia in 4,800 BCE and camels transported silk and spices from the Far East in 2,000 BCE. It is an industry that affects every one of us. The coffee you drank this morning? It likely came from Brazil, Honduras, Ethiopia, Kenya, or somewhere else around the world. The furniture in your house, the clothes you are wearing, and the computer or phone you are using to read this article were all likely imported from overseas. World Trade Month isn’t until May, but we are getting in early to bring you five fascinating facts about international trade.
It is (Almost) All on Borrowed Dime
It is easy to assume that importers and exporters are swimming in cash, but did you know that approximately 90 percent of global trade relies on trade and export finance? These loans are generally short-term and help businesses bridge the periods between the purchase of raw materials, the manufacture of goods, and the time when the buyer pays their invoice.
There are several different options when it comes to trade finance. The business may take out a letter of credit, use import or export finance, take up streamlined credit arrangements, or employ telegraphic transfers.
Global Capital Flows are Linked to GDP
We have all heard of Gross Domestic Product (GDP), which is equal to the final value of goods and services produced by a country within a year. The GDP growth rate helps indicate the economic performance of that country.
Global capital flows refer to the movement of money for trade, investment, and business between different countries. Research has shown that an increase in global capital flow is linked to a rise in GDP, particularly for emerging markets.
Asia is a Global Trade Super Player
When you compare the number of shipping containers or twenty-foot equivalent units (TEU), nine of the top ten world container ports are based in Asia. First on the list is Shanghai, followed by Singapore, Shenzhen, and Ningbo-Zhoushan. Those four ports shipped out around 1,327,000 shipping containers in 2018 alone. That is a lot of product!
The Industry is Predicting a Fourth Industrial Revolution
The first industrial revolution started around 1765 with the introduction of machines. The second came in 1870. At this time, new energy sources emerged, with gas, oil, and electricity replacing coal. The third industrial revolution came in 1969, with the introduction of computers and the rise of telecommunications.
Most pundits agree that we are now well and truly into the fourth industrial revolution. The growth in internet use and online shopping, coupled with a general increase in consumer spending, drives advancements in cargo and logistics companies. The internet has made goods and services in other countries accessible to anyone with a phone or computer.
Most Countries are Heavily Reliant on One Export Industry
The World Economic Forum has published a world map that shows the main export of each country globally, and it is pretty amazing to see. The Middle East, Asia, Africa, and South America are all heavily reliant on oil exports. India’s top export may surprise you – it is precious stones. Whatever their main export, most countries rely heavily on global trade for economic growth and to meet their needs for different goods.
Which of these five international trade facts surprised you the most? Are there any you would add to the list?