Trade and Globalization

Introduction

The tremendous growth of international trade over the past several decades has been both a primary cause and effect of globalization. The volume of world trade since 1950 has increased  twenty-seven fold from $296 billion to more than $8 trillion in 2005.¹ As a result, consumers around the world now enjoy a broader selection of products than ever before. Additionally, a whole host of U.S. government agencies and international institutions has been established to help manage the ever-growing flow of goods, services, and capital.

Although increased international trade has spurred tremendous economic growth across the globe —- raising incomes, creating jobs, reducing prices, and increasing workers’ earning power — trade can also bring about economic, political, and social disruption.

Because the global economy is so interconnected, when large economies suffer recessions, the effects are felt around the world.  When trade decreases, jobs and businesses are lost.  In the same way that globalization can be a boon for international trade; it can also have a crushing impact.

The following Issue Brief is designed to help you understand some of the fundamental economic principles behind international trade, familiarize you with some of the technical terms, and offer some insights into some of the controversies surrounding international trade policy both in the United States and abroad.