The growth of international trade has been very rapid in the last few decades. To the extent that today all countries in the world engage in trading with other countries.
International trade has a great impact on country’s economic development, no matter which political system is in place. By trading together, countries can improve relationships which can help to resolve political differences between them.
Free trade movements encourage international trade
Reducing international trade restrictions greatly helps countries to trade freely.
With the rise of neoliberalism on both sides of the Atlantic in the US and the UK, freeing up international trade has become an important part of government policies.
Neoliberalism. Neoliberalism is the ideology that emphasizes the value of free market competition. In theory, it seeks to transfer the control over economic factors of production from the public sector to the private sector.
This increased freedom of movements of goods, services, capital and people around the world has been a major contributing factor driving the process of globalization.
Over the last couple of decades, international trade have been driven by the establishment of The World Trade Organization (WTO), free-trade blocks and the support from The World Bank and International Monetary Fund.
- The World Trade Organization (WTO) is made up of countries committed to freeing world trade from restrictions. The World Trade Organization (WTO) holds meetings to discuss reductions in tariffs, quotas and embargoes. Whereby actions must be agreed by all member states.
- Free-trade blocs are groups of countries geographically close that have arranged to trade with each other without restrictions. Examples of free-trade blocks include the UE (European Union), NAFTA (North American Free Trade Association) or ASEAN (Association of South East Asian Nations). Sometimes, they may impose trade barriers on other groups of countries to gain competitive advantage against imports.
- The World Bank and International Monetary Fund (IMF) play a major role in eliminating protective barriers for developing countries. The World Bank is an international financial institution that provides loans and grants to the developing countries. While International Monetary Fund (IMF) fosters global monetary cooperation, facilitates international trade, promotes sustainable economic growth and reduces poverty around the world.
The establishment of free trade movements and the increasing use of information technology systems reduce the differences between national markets. It powers up international trade. By reducing the importance of national borders, it is easier for businesses from different countries to trade with each other.
