Thanks in part to the progressive deregulation of trade achieved in multilateralmultiple countries working together to on a specific issue, regional and bilateral trade agreements, global trade flows have grown 22 times in size since 1970, more than twice the rate of economic growth during the same period. It is generally believed that the massive growth of trade has led to higher productivity, thereby improving living standards and promoting prosperity worldwide.
International flows of imports and exports have changed as dramatically in content and direction over the past five decades as they have in size. The United States began and ended this period as the world’s largest and most technologically advanced economy, but other countries have experienced astonishing increases in their level of development and technological sophistication, and their trade with the United States and other countries has changed as a consequence.
The prevailing pattern of international trade in the first decade following World War II looked like this:
- The United States and Western European countries produced most of the world’s industrial machinery, such as major manufactured products like vehicles or washing machines, and technologically sophisticated goods like electronics.
- These wealthy industrial countries exported manufactured goods (along with plenty of grains and minerals, in the case of the United States) to less-wealthy developing countries.
- Developing countries exported back to the industrial countries raw materials like minerals, and timber, agricultural products, and simple, manufactured goods like toys or clothing.
However, in just the past four decades, dozens of poor countries took major strides in developing their economies. Exports produced in developing countries are generally still dominated by raw or semi-processed materials and agricultural products, but light and heavy manufacturing has a steadily growing share of these countries’ economic output and exports.
In the first few decades following World War II, several developing nations became major industrial powers, producing manufactured goods equal and sometimes superior in quality and sophistication to products made in the United States. One such nation was Japan, whose per capitaPer unit of population. Per capita energy consumption, for example, is the amount of energy that is used on average by each person in a given country. income at the end of World War II was less than it was in 1925.
For the United States and several countries in Europe, the emergence of new manufacturing capacities has been a mixed blessing. The growth of developing economies and the post-war recoveries of Europe and Japan have helped turn poor and devastated countries into massive markets for U.S. exports and investment. American companies, farmers, and workers have benefited immensely from these new commercial opportunities. Had the rest of the world not developed and grown as much as it has since World War II, American living standards would not have improved as much as they have.