The Growth in World Trade

International Marketing 10th edition, Michael R. CzinkotaIlkka A. Ronkainen, 2012.


After its stock market crash of 1929, the United States turned its back on free trade. Fearing losses of jobs at home, this country tried to assist local industries by sharply increasing taxes on imports from other countries. Unfortunately, other countries retaliated with similar measures. In less than a year, world trade collapsed, sending the world into a global depression. Two hard-hit countries were Germany and Japan. Many believe that this severe economic downturn encouraged the militaristic regimes that precipitated World War II. After the war, the United States and other industrialized nations were eager for world trade to be promoted and to expand.

Their vision has certainly come to pass. World trade has increased over 22-fold since 1950, far outstripping the growth in world GDP. This growth has been fueled by the continued opening of markets around the world. The Bretton Woods conference of world leaders in 1944 led to the establishment of the General Agreement on Tariffs and Trade (GATT), which we will discuss in detail later. GATT, and subsequently the World Trade Organization (WTO), helped to reduce import tariffs from 40 percent in 1947 to an estimated 4 percent today. The principle of free trade has led to the building of market interdependencies. International trade has grown much more rapidly than world GDP output, demonstrating that national economies are becoming much more closely linked and interdependent via their exports and imports. This interdependence has created many opportunities for international marketers but has made world trade more vulnerable to global recessions. The WTO predicted a 9 percent drop in world trade as a result of collapsing global demand in 2009.3

Foreign direct investment, another indication of global integration, increased over 100 percent in a single decade, and services are an important and growing part of the world’s economy. Industries such as banking, telecommunications, insurance, construction, transportation, tourism, and consulting make up over half the national income of many rich economies. A country’s invisible exports include services, transfers from workers abroad, and income earned on overseas investments.

What do you think about global trade trends today? (Share your point of view in comments)

This is an excerpt from Dr. Czinkota’s book International Marketing 10th edition, co-authored by Dr. Ilkka Ronkainen.