Question

Brief introduction of new trends in post-war international trade development

Answer 1

Trade and industrialization have reinforced each other. At the international level, trade has allowed countries to specialize between industry and other sectors, between different branches of industry, and increasingly even between different stages in production. Trade has provided access to critical industrial inputs, including technology, for countries incapable of producing them. Expanded demand for exports has spurred technological development and industrial production. In turn, the advent of new industrial technologies has shaped the pattern of specialization and hence the pattern of trade. At the national level, domestic trade has allowed specialization between economic sectors and within industry. Again, new technologies and industrial progress have altered the internal pattern of specialization and trade. In the other direction, increased domestic trade has provided the demand to stimulate the introduction of new technologies and further industrialization.

After the innovations in cotton textiles, iron smelting, and the steam engine, industrialization centered on steel, railways, and steamships from about 1820 to 1870. Railways integrated national markets and stimulated demand for iron and steel. With steel and steam power, bigger and more reliable ships could be built. Freight costs dropped, which enabled such previously remote areas as the American Midwest to produce bulky agricultural products for distant markets in Europe. Belgium, France, Germany, and the United States began to industrialize in this period. Europe, the United States, Canada, Argentina, and Australia were linked by international trade in agricultural produce, raw materials, and manufactured products

The spread of industrialization to the European continent was facilitated by important institutional reforms and the removal of many of the restrictions that had hindered domestic commerce. By 1820, Europe had emerged from the French Revolution and the Napoleonic wars that followed it. In France, tariffs and tolls on domestic trade, as well as guild restrictions on the choice of occupation, were abolished immediately after the Revolution. These reforms were soon followed by a standardized system of weights and measures (the metric system) and new legal codes protecting property rights. The Napoleonic wars helped diffuse this wave of liberalism and reform to other parts of Europe Belgium, the Netherlands, Switzerland, Italy, and much of Germany. In Germany, after years of effort, barriers to domestic trade were greatly reduced in 1834 by the creation of the Zoilverein, a customs union among the different German states.

The next forty-three years-1870 to 1913 saw major advances in science and technology. The invention of the Gilchrist-Thomas process, which allowed steel to be made from iron ore of high phosphorus content, propelled the industrial development of countries with extensive deposits of phosphoric ores, such as Germany and Sweden. Other innovations in this period electricity, refrigeration, organic chemicals, the internal combustion engine, the transatlantic telegraph, and the radio are commonly regarded as the basis of a "second industrial revolution." Some of them reinforced the trend toward greater physical integration of world markets: refrigeration, for example, made it possible to ship frozen meat from Australia to London by the 1880s.

By the mid-1950s postwar reconstruction was virtually complete, and the world economy entered a period of unprecedented output and trade expansion. Manufacturing led the way in both output and export growth. As in the nineteenth century, exports grew faster than output. Postwar growth in manufacturing was fueled by an explosion of new products, new technologies, liberalization of international trade, and increasing integration of the world economy. Assembly line production, the internal combustion engine and the automobile, electricity and the consumer durables that came with it all of them predating the war were given a push by the postwar release of postponed consumer spending. There were entirely new technological advances as well: synthetic materials, petrochemicals, nuclear energy, jet aircraft, and computers and electronic products (notably television). And great strides were made in telecommunications technologies, microelectronics, and robotics. The impact of microelectronics and robots on production processes is potentially so great that many observers believe the world is now on the threshold of a "third industrial revolution

Countries pursuing the import substitution strategy typically started by producing final manufactures to replace imports. Many enjoyed initial bursts in the growth of manufacturing. But since production usually required imported intermediate and capital goods, sustained industrial growth depended on the expansion of exports to provide the necessary foreign exchange. Countries that made an early transition to export expansion, such as the Republic of Korea, sustained their industrial growth. Many others did not make the transition. They stayed in the protective import substitution phase and their industrial development was retarded.

Multinational corporations in manufacturing date back as far as the nineteenth century (Singer, a U.S. firm, established a factory in Glasgow in 1867 to manufacture sewing machines), and those in primary commodities date back even farther. But it is only since the 1960s that multinationals have become major actors in shaping world industrialization. Today, between 25 and 30 percent of the world's stock of foreign direct investmentthe channel for multinationals' investmentsis in developing countries; about 40 percent of this is in the manufacturing sector. Manufacturing multinationals have been attracted to some of the large developing countries, especially in Latin America, because of trade policies that restricted imports of final manufactures

As a group, the developing countries still have only a small share in world manufacturing output, but their output and exports of manufactures have nonetheless grown more rapidly than those of the industrial countries since the 1960s. No developing economy figured among the world's top thirty exporters of manufactured products in 1965. Twenty years later Hong Kong and the Republic of Korea were among the top fifteen, with export shares close to those of Sweden and Switzerland. Singapore and Brazil were among the top twenty, with export shares close to those of Denmark and Finland. Although this performance occurred during a period of unprecedented real growth in world output and trade in manufactured products, it is remarkable that developing countries sustained their progress even when the world economy slowed after 1973. Moreover, manufactured exports from developing countries have become more sophisticated. Developing countries have diversified from traditional labor-intensive products (such as textiles) or those based on natural resources.