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 has increased twenty-seven fold from $296 billion in 1950 to more than $8 trillion in 2005.1 Although international trade experienced a contraction of 12.2 percent in 2009—the steepest decline since World War II—trade is again on the upswing.2
As a result of international trade, consumers around the world enjoy a broader selection of products than they would if they only had access to domestically made products. Also, in response to the ever-growing flow of goods, services and capital, a whole host of U.S. government agencies and international institutions has been established to help manage these rapidly-developing trends.
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.
Since 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 devastating effects.
The following Issue in Depth 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 insight into a few of the controversies surrounding international trade policy both in the United States and abroad.
1 World Trade Organizationan international body dealing with the rules of trade between participating nations. (2007).
2 World Trade Organizationan international body dealing with the rules of trade between participating nations. (2010).
Next: A Snapshot of U.S. Trade