World Trade: An Overview

World Trade: An Overview
In 2008, the world as a whole produced goods and services worth about
$50 trillion at current prices. Of this total, more than 30 percent was sold
across national borders: World trade in goods and services exceeded
$16 trillion. That’s a whole lot of exporting and importing.
In later chapters we’ll analyze why countries sell much of what they produce to
other countries and why they purchase much of what they consume from other
countries. We’ll also examine the benefits and costs of international trade and the
motivations for and effects of government policies that restrict or encourage trade.
Before we get to all that, however, let’s begin by describing who trades with
whom. An empirical relationship known as the gravity model helps to make sense of
the value of trade between any pair of countries and also sheds light on the impediments
that continue to limit international trade even in today’s global economy.
We’ll then turn to the changing structure of world trade. As we’ll see, recent
decades have been marked by a large increase in the share of world output that
is sold internationally, by a shift in the world’s economic center of gravity toward
Asia, and by major changes in the types of goods that make up that trade.
LEARNING GOALS
After reading this chapter, you will be able to:
• Describe how the value of trade between any two countries depends on
the size of these countries’ economies and explain the reasons for that
relationship.
• Discuss how distance and borders reduce trade.
• Describe how the share of international production that is traded has
fluctuated over time and why there have been two ages of globalization.
• Explain how the mix of goods and services that are traded internationally
has changed over time.