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Growing Trade, Shrinking World |
International trade1 shapes
our everyday lives and the world we live in. Nearly every
time we make a purchase we are participating in the global
economy. Products and their components come to our store
shelves from all over the world.
Goods and services that a country buys from another
country are called imports, and goods and services
that are sold to other countries are called exports.
Trade mostly takes place between companies. However,
governments and individuals frequently buy and sell
goods internationally.
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Most international trade consists of the purchase and
sale of industrial equipment, consumer goods, oil and
agricultural products. Services such as banking, insurance,
transportation, telecommunications, engineering and
tourism accounted for one-fifth of world exports in
2000.
World Exports Are Up Sharply
Since the end of World War II, there has been a rapid
increase in international trade.
- In 1950, total world merchandise exports amounted
to $58 billion
- In 2000, exports were $6.3 trillion, over a 100-fold
increase
More information on world
trade statistics  .
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With the increase in volume, trade has become very important
to the economic well-being of many countries. In early
1960s, the United States bought less than $1 billion of
foreign cars and parts. By 2001, this figure had increased
to more than $189 billion.
Financial ties between United States and the rest of
the world have grown significantly over time:
- Number of foreign banking offices operating in the
United States rose from fewer than 40 to over 600
at present
- Amount of foreign direct investment2
(FDI) was $158 billion in 2001
- Gross transactions of long-term U.S. government
securities by foreigners rose from $144 billion in
1978 to over $9.1 trillion in 2000
The cost of international transportation and communication
has fallen drastically, resulting in greater integration
among the economies of the world. Because of this interdependence,
economic trends and conditions in one country can strongly
affect prices, wages, employment and production in other
countries. Events in Tokyo, London and Mexico City have
a direct effect on the everyday life of people in the
U.S., just as the impact of events in New York, Washington
and Chicago is felt around the globe.
If stocks on the New York Stock Exchange plummet in
value, the news is transmitted instantly worldwide,
and stock prices all over the world might change. This
means that countries have to work together more closely
and rely on each other for prosperity.
Data on FDI
in the U.S.
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International trade occurs because individuals, businesses
and governments in one country want to buy goods and services
produced in another country.
- Trade provides people with a greater selection of
goods and services to choose from
- Often these goods are available at prices lower
than those in the domestic economy
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1 International trade is
the system by which countries exchange goods and services.
Countries trade with each other to obtain things that
are better quality, less expensive or simply different
from what is produced at home.
2 Foreign direct investment
is the amount of money individuals invest in companies,
assets and real estate of another country.
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