The International Trade Environment For New, Small and Medium-size Enterprises Seeking Expansion.

Due to the economic interdependence of countries, services, goods, labor, and capital now move freely across borders. The International space now creates a place for small and marginalized producers and larger mainstream enterprises to further serve the global market and for profitable expansion and growth.

Another positive side of the international trade environment and all the aspects of globalization it comes with like global trade and export provide a favorable ground for job creation, development in many communities, prosperity and poverty reduction.

It’s said

Failing to export is like punching above your weight but way below your potentials.

In this regard, world trade should be in a continuous mission and open for development and improvement.

To better understand World Trade you need to;

1- Focus your understanding of how the world is changing as we continue to experience globalization and the impact of these changes on your company.

2- Research about the benefits, challenges, and risks which are involved in the international space. Most importantly what questions you should consider asking before moving forward to export your goods or services.

3- Enlighten yourself with the international trade agreements, the rules, and regulations involved in the global market. Think about how these variables can affect your export activities

4- It is of great importance to know which sources of information to depend on, trust and consult to be able to stay ahead of your game and be fully informed regarding the international and domestic trends.

Globalization and its Effect on International Trade

The global trade is rapidly growing and presenting a world of endless opportunities. The world economy is changing fast, even with the global financial crisis and coupled with other factors like disputes between nations, politics, global exports are valued two times more than the previous decades.

In case you have not noticed, or have you had the opportunity to visit a country like Dubai? You will be shocked to realize almost every product in imported and just a handful of products are manufactured locally.

It is important to note that almost $1.5 billion in international transactions takes place in a single day. The volume of goods, investments, and services that goes across borders are growing rapidly. An estimated $8.9 trillion worth of goods are shipped across the borders and about $2.10 trillion of services are offered between countries in the world.

Globalization has gone a long way to increase the foreign exchange of currencies, cross border trading, the free flow of capital, the free flow of information and the mobility of humans from one place to another.

Globalization has helped to integrate the world economies and sweep away the concepts of borders. In our world today, the target market should not only focus on your homeland but stepping into the global scene.

For your recollection, globalization is not a new concept. The beginning of globalization can be traced right back to the Roman, Greek, Egyptian and Babylonian Empires. During this period, people traveled from one place to another for better living, better markets with attractive profits. If we can still remember the purpose of the famous Silkroad, which linked Central Asia and Europe during the Mongols Regime.

Some Effects of Globalization on the Global Economy.

1) The Availability of Global Markets.

 Globalization has been able to merge or eliminate historical distinctions and separate national markets to form a single and huge global market place. As globalization expands, it liberalizes the day to day activities of businesses and the easy exchange of funds and goods. Above all the elimination of cross-border trade barriers made it easy for the development of a global market.

2) The Availability of International Institutions 

International institutions are known to play a vital role in the international trading environment. Such institutions may include the United Nations Organization (UNO), the International Monetary Fund (IMF), The World Trade Organization (WTO), and not leaving out the World Bank. These international institutions regulate and promote favorable grounds for business between nations. These institutions are known to even govern issues of justice, political and human relations. The World Bank even facilitates loans for these nations for investments. Other small institutions like the Chambers of Commerce and Associations like SGS also facilitates trade inspections between businesses.

3) The change in the World Trade Picture 

Globalization has made it possible for some nations other than the United States to enjoy dominance in world export. Before, the United States stands out in world export and the dominant nation when it comes to world export. In 1963, the United States accounted for over 40.3% share of world export with Germany in second place with only a 9.7% share in world export. By 2004, the United States accounted for only a 10.4% share in world export with Germany again in second place with a 9.5% share.  Other nations like Japan, South Korea, and China are seriously challenging the accountability of world export.

4) The changes in foreign direct investments

Foreign direct investment (FDI) is a vital indicator of the development of the economy. FDI is considered as real growth and real investment. The rapid increase in FDI has projected technology and know-how transfer, diversification, create more jobs and businesses, increase income, increase savings, Increase the level of factor productivity, increase Gross National Income per Capita (GNI), high capital intensity and infrastructure.  From the year 1990 – 2000, the global FDI increased by 644% from $196.315 billion to $1.461 trillion. From the year 2000 – 2007, the world’s FDI doubled from $1.461 trillion to $3.111 trillion. From the year 2000 – 2017, the FDI has increased by 34%, from $1.461 trillion dollars to $1.957 trillion dollars respectively.

5) Corporate changes and Increase in multinational companies.

With the current trends of globalization and global competitiveness, many organizations have seen it necessary to use technology innovatively and skillfully. This has increased the trend for multinational companies. Before the rapid growth of globalization, the United States accounted for a 48.5% share of multinational companies (MNC’s) by 1973. By 2002, it was not the case as the United States shares in MNC’s dropped to 28%. With globalization, many different countries entered the race to go global and to enjoy the unceasing benefits of serving the world.

6) Changes in technology  

Technology has made it very easy for information to move smoothly. With the use of the internet and a wireless phone, business transactions can be conducted in less than no time. With the continuous development in telecommunication, wireless technologies, and undersea fibres, an international technological infrastructure has been created. Copyright laws, patent and international contracts and agreements can be easily applied. Through the development of information technologies, confirmation and verifications can be conducted across borders with limited time consumption. Related frauds in international trade can be detected and traced. Today, this advancement in the IT sector has created millions of jobs in the developing world. By 1995, just a few million users enjoy the benefits of the telecommunication sector in the emerging economies but by 2010 over 1.2 billion people were making use of the telecommunication industry.

7) The Effects on the standards of living 

Expansion in trade and investment has always been a major effect in the worlds’ globalization. It is quite evident to see that poverty reduction had declined in the region experiencing high levels of investments and trade. India is known to be one of the nations with a very high level of poverty but due to the rapid growth in FDI in India, there has been a high decline in poverty and an increase in per capita income compared to years back. Mexico has been able to crush the macroeconomics crisis better than its neighboring countries. Similarly, Columbia, Poland, and Zambia are now enjoying the benefits of falling prices for goods and services.

8) The industrial effect

Today, many companies now undertake production with the notion to serve the world market. This is to show how globalization has also affected the industrial sector. Industries now produce their goods according to the worlds’ standards. Companies who think this way have the potential to flourish in the world market. A good practice can be seen with coca-cola producing their drinks according to the taste generally accepted in the world.

9) Cultural changes

Since the advent of globalization, the world is gradually transforming into a global village. With the boost in tourism and the increase in diversity, people are able to travel and learn from different cultures around the world. Other cultures are willing to learn from their counterparts through trade and in other to better present their goods and services in the market place. This has enhanced cultural exchange in a variety of ways. This experience has allowed people from other cultures to be able to come together in other to project a world rich in biodiversity. We can easily understand each culture as we co-exist and to enhance trade through a better understanding of the cultural differences.

10) The effects on employment

It is common practice today to see experts moving from far and near to work in their respective industries overseas. The growth in FDI has prepared a favorable ground for experts to move for a better standard of living in different parts of the world. Also, with multinational companies emerging here and there also makes it easy to pick a job with a sustainable pay of salary. The growth of FDI and the increase in MNC’s around the world has also created a booming job market in developing and emerging economies, thereby increasing the standard of living and reducing poverty.

It is estimated in a few years to come, the overall dollar value of trade across nations and borders will be greater than the overall dollar value of trade within the global individual economies or countries combined all together.