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Monday, May 14, 2012

Trade At Globe Scale - Business

International Trade is a term used for the trade of goods and services that takes places between different countries around the globe.With the exchange of goods and services, a number of othersocial, political and economic changes are exported and imported into the country. International Trade has increased over the past two decades due to many reasons. A major reason has been the increase in "free trade". Previously, there was little free trade within countries and high regulatory tariffs were applied on international trade. But as the importance of free trade became evident, all major manufacturing regions like United States and Europe and lately China, India and Russia have also shown support for free trade. As a result, regional agreements have been signed such as NAFTA and European Union. A key change that has occurred during the past decades is the creation of NAFTA, North America Free Trade Agreement, which includes the United States of America, Canada and Mexico. I t came into being in 1994. The rise in trade can be accounted to the rise in production sharing within NAFTA countries. Due to decrease in transportation costs and other trading barriers, the intermediate goods have been moved across international borders with much ease and with value added at every stage of production. Another major reason has been the "outsourcing" many businesses around the world. Outsourcing refers to delegating a firm 'operations to a specialized entity, outside the firm. This is mainly done to reduce cost and to gain competitive edge. The rise in multinational corporations all around the world, has played a major role in turning the world into a global village, bringing about a rise in international trade. By locating their plants and offices around the globe, they have been able to cut costs of production. One of the main advantages of shifting production plants to countries such as India, China and Vietnam is reduction in costs because of cheaper raw material and labor. These countries have surplus labor that is willing to work at low wages and the availability of vast quantity of raw materials. Production costs are always a huge problem for major corporations and the lure of cheaper resources is enough to drive them to developing countries and this contributes to globalization.It is also important to note the international trade, which has resulted in globalization, is a result of demand for homogenous products as well. With people traveling to other countries and buying new products, the demand for the same increase in their native countries. Apart from travelers, it is actually the immigrants who have contributed more to international trade and globalization. With immigrants from developing countries moving to the US and other western countries, the demand for the products and services they use there has been created in their native lands. This gives major corporations a new market opening and they use this demand to spread their wings. This results in their entry into international markets. The demand of goods and services from western countries is now huge and the results are obvious everywhere in the shape of McDonalds, KFC, Pizza Hut, Hang Tan, Nike, Reebok and the like opening their outlets all over the world. The rise in International trade has also sparked intense debates and protests in every corner of the world. Protesters complain that major corporations have used free trade as a vehicle to spread Americanism. They term it as the new imperialism. These debates and objections apart, free trade and growing international trade is a reality and its implications will definitely be far reaching.

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