globalization and international trade essay

Globalization and International Trade Essay

The reviewed module proved to be very insightful in more ways than one. The study of the phenomena and mechanisms of economics and modern society are beneficial to one’s professional and personal development since it improves one’s awareness of the surrounding world. As for the theories that are created to attempt to understand these phenomena, they contribute to this awareness while also improving one’s cognitive skills, including critical thinking.

The module was devoted to globalization and international trade, which, in my opinion, are crucial topics for the modern business since nowadays, an industry and even a single company are unlikely to remain unaffected by globalization. Globalization, however, is more than just an economic phenomenon; the term describes the processes of global integration in most fields of human activities, including communication, culture, social norms, and economics (Näätänen 2015), which eventually results in international trade (Rugman & Collinson 2012).

The two theories of Absolute and Comparative Advantages attempt to explain the latter phenomenon and provide the actors with strategies that can supposedly grant a niche in the international market (Rugman & Collinson 2012). Both theories take into account the fact that the global economies are varied; some of them are capable of producing a good with greater efficiency (fewer inputs), which means that they have the absolute advantage in this respect. For instance, a tropical country has the absolute advantage in producing tropical fruits.

Comparative advantage deals with lower opportunity costs of producing a good. In this case, the country that has the advantage produces and sells more of this good, and another country has the opportunity of buying it at a cost that is lower than the cost of production. In my opinion, these theories provide an insight into the way international trade complicates and facilitates modern economy: it tends to improve the well-being of humanity by promoting most efficient ways of producing goods and provides the connections that make globalization real, but the connections remain complex and tend to be affected socially and politically. An example is sanctions, for instance, the ones that have been imposed on Russia recently (Jenkins 2016).

The module demonstrates that globalization is capable of affecting industries in positive and negative ways, but it is hardly reversible (Kiyotaki & Miyakawa 2013; Solodkovska & Olefirenko 2014; Tuinstra, Wegener & Westerhoff 2014). As a result, the understanding of its mechanics should forearm us with the means of using it to our advantage. To sum up, I believe that the module broadens my awareness and knowledge of the theory of business and the modern world in general.

Also, this knowledge does not have to remain theoretical as it is capable of demonstrating me the ways of contributing to the development of my future workplace. Moreover, my Goal Three consists becoming an effective administrator, which involves expanding my theoretical knowledge of this role and business in general. Finally, there is a chance that I will choose to become an entrepreneur (possibly, in a field related to healthcare). As a result, I am not unlikely to practically apply the knowledge gained through this module.

Reference List

Jenkins, S 2016, ‘After Litvinenko, more sanctions against Russia would be pointless – and hypocritical’ , The Guardian . Web.

Kiyotaki, F & Toshiji Miyakawa, T 2013, ‘Barriers to Global Free Trade through Bilateral Agreements’, Review of International Economics, vol. 21, no. 3, pp. 536-548. Web.

Näätänen, A 2015, ‘The impact of economic globalization on the employment policies in 19 western democracies from 1985 to 2010. Limited change or radical shift towards workfare?’, Social Sciences, vol. 4, no. 3, pp. 700-717. Web.

Rugman, A. & Collinson, S 2012, International business , Pearson, New York.

Solodkovska G. & Olefirenko, V 2014, ‘Ways of Improvement of Non-Tariff Measures of International Trade Regulations’, Management Theory and Studies for Rural Business and Infrastructure Development , vol. 36, no. 4, pp. 966-976. Web.

Tuinstra, J, Wegener, M & Westerhoff, F 2014, ‘Positive Welfare Effects of Trade Barriers in a Dynamic Partial Equilibrium Model”, Journal of Economic Dynamics & Control , vol. 48, pp. 246-264. Web.

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Trade and Globalization

How did international trade and globalization change over time? What is the structure today? And what is its impact?

By Esteban Ortiz-Ospina, Diana Beltekian and Max Roser

This page was first published in 2014 and last revised in April 2024.

On this topic page, you can find data, visualizations, and research on historical and current patterns of international trade, as well as discussions of their origins and effects.

Other research and writing on trade and globalization on Our World in Data:

• Is globalization an engine of economic development?
• Is trade a major driver of income inequality?

Related topics

Economic Growth

See all our data, visualizations, and writing on economic growth.

Economic Inequality

See all our data, visualizations, and writing on economic inequality.

See all our data, visualizations, and writing on migration.

See all interactive charts on Trade and Globalization ↓

Trade has changed the world economy

Trade has grown remarkably over the last century.

One of the most important developments of the last century has been the integration of national economies into a global economic system. This process of integration, often called globalization, has resulted in a remarkable growth in trade between countries.

The chart here shows the growth of world exports over more than the last two centuries. These estimates are in constant prices (i.e. have been adjusted to account for inflation) and are indexed at 1913 values.

The chart shows an extraordinary growth in international trade over the last couple of centuries: Exports today are more than 40 times larger than in 1913.

You can switch to a logarithmic scale under ‘Settings’. This will help you see that, over the long run, growth has roughly followed an exponential path.

The increase in trade has even outpaced economic growth

The chart above shows how much more trade we have today relative to a century ago. But what about trade relative to total economic output?

Over the last couple of centuries the world economy has experienced sustained positive economic growth , so looking at changes in trade relative to GDP offers another interesting perspective.

The next chart plots the value of traded goods relative to GDP (i.e. the value of merchandise trade as a share of global economic output).

Up to 1870, the sum of worldwide exports accounted for less than 10% of global output. Today, the value of exported goods around the world is around 25%. This shows that over the last hundred years, the growth in trade has even outpaced rapid economic growth.

Trade expanded in two waves

The first "wave of globalization" started in the 19th century, the second one after ww2.

The following visualization presents a compilation of available trade estimates, showing the evolution of world exports and imports as a share of global economic output .

This metric (the ratio of total trade, exports plus imports, to global GDP) is known as the “openness index”. The higher the index, the higher the influence of trade transactions on global economic activity. 1

As we can see, until 1800 there was a long period characterized by persistently low international trade – globally the index never exceeded 10% before 1800. This then changed over the course of the 19th century, when technological advances triggered a period of marked growth in world trade – the so-called “first wave of globalization”.

This first wave came to an end with the beginning of World War I, when the decline of liberalism and the rise of nationalism led to a slump in international trade. In the chart we see a large drop in the interwar period.

After World War II trade started growing again. This new – and ongoing – wave of globalization has seen international trade grow faster than ever before. Today the sum of exports and imports across nations amounts to more than 50% of the value of total global output. 2

Before the first wave of globalization, trade was driven mostly by colonialism

Over the early modern period, transoceanic flows of goods between empires and colonies accounted for an important part of international trade. The following visualizations provide a comparison of intercontinental trade, in per capita terms, for different countries.

As we can see, intercontinental trade was very dynamic, with volumes varying considerably across time and from empire to empire.

Leonor Freire Costa, Nuno Palma, and Jaime Reis, who compiled and published the original data shown here, argue that trade, also in this period, had a substantial positive impact on the economy. 3

The first wave of globalization was marked by the rise and collapse of intra-European trade

The following visualization shows a detailed overview of Western European exports by destination. Figures correspond to export-to-GDP ratios (i.e. the sum of the value of exports from all Western European countries, divided by the total GDP in this region). You can use “Settings” to switch to a relative view and see the proportional contribution of each region to total Western European exports.

This chart shows that growth in Western European trade throughout the 19th century was largely driven by trade within the region: In the period 1830-1900 intra-European exports went from 1% of GDP to 10% of GDP, and this meant that the relative weight of intra-European exports doubled over the period. However, this process of European integration then collapsed sharply in the interwar period.

After the Second World War trade within Europe rebounded, and from the 1990s onwards exceeded the highest levels of the first wave of globalization. In addition, Western Europe then started to increasingly trade with Asia, the Americas, and to a smaller extent Africa and Oceania.

The next graph, using data from Broadberry and O'Rourke (2010) 4 , shows another perspective on the integration of the global economy and plots the evolution of three indicators measuring integration across different markets – specifically goods, labor, and capital markets.

The indicators in this chart are indexed, so they show changes relative to the levels of integration observed in 1900. This gives us another perspective on how quickly global integration collapsed with the two World Wars. 5

The second wave of globalization was enabled by technology

The worldwide expansion of trade after the Second World War was largely possible because of reductions in transaction costs stemming from technological advances, such as the development of commercial civil aviation, the improvement of productivity in the merchant marines, and the democratization of the telephone as the main mode of communication. The visualization shows how, at the global level, costs across these three variables have been going down since 1930.

Reductions in transaction costs impacted not only the volumes of trade but also the types of exchanges that were possible and profitable.

The first wave of globalization was characterized by inter-industry trade. This means that countries exported goods that were very different from what they imported – England exchanged machines for Australian wool and Indian tea. As transaction costs went down, this changed. In the second wave of globalization, we are seeing a rise in intra -industry trade (i.e. the exchange of broadly similar goods and services is becoming more and more common). France, for example, now both imports and exports machines to and from Germany.

The following visualization, from the UN World Development Report (2009) , plots the fraction of total world trade that is accounted for by intra-industry trade, by type of goods. As we can see, intra-industry trade has been going up for primary, intermediate, and final goods.

This pattern of trade is important because the scope for specialization increases if countries are able to exchange intermediate goods (e.g. auto parts) for related final goods (e.g. cars).

Trade and trade partners by country

Above, we examined the broad global trends over the last two centuries. Let's now examine country-level trends over this long and dynamic period.

This chart plots estimates of the value of trade in goods, relative to total economic activity (i.e. export-to-GDP ratios).

These historical estimates obviously come with a large margin of error (in the measurement section below we discuss the data limitations); yet they offer an interesting perspective.

You can edit the countries and regions selected. Each country tells a different story. 7

In the next chart we plot, country by country, the regional breakdown of exports. India is shown by default, but you can edit the countries and regions shown.

When switching to displaying relative values under ‘Settings’, we see the proportional contribution of purchases from each region. For example, we see that more than a third of Indian exports went to Asian countries in recent decades.

This gives us an interesting perspective on the changing nature of trade partnerships. In India, we see the rising importance of trade with Africa—a pattern that we discuss in more detail below .

Trade around the world today

How much do countries trade, trade openness around the world.

The metric trade as a share of GDP gives us an idea of global integration by capturing all incoming and outgoing transactions of a country.

The charts shows that countries differ a lot in the extent to which they engage in trade. Trade, for example, is much less important to the US economy than for other rich countries.

If you press the play button on the map, you can see changes over time. This reveals that, despite the great variation between countries, there is a common trend: over the last couple of decades trade openness has gone up in most countries.

Exports and imports in real dollars

Expressing the value of trade as a share of GDP tells us the importance of trade in relation to the size of economic activity. Let's now take a look at trade in monetary terms – this tells us the importance of trade in absolute, rather than relative terms.

The chart shows the value of exports (goods plus services) in dollars, country by country.

The main takeaway here is that the trend towards more trade is more pronounced than in the charts showing shares of GDP. This is not surprising: most countries today produce more than a couple of decades ago , and at the same time they trade more of what they produce. 8

What do countries trade?

Trade in goods vs. trade in services.

Trade transactions include goods (tangible products that are physically shipped across borders by road, rail, water, or air) and services (intangible commodities, such as tourism, financial services, and legal advice).

Many traded services make merchandise trade easier or cheaper—for example, shipping services, or insurance and financial services.

Trade in goods has been happening for millennia , while trade in services is a relatively recent phenomenon.

In some countries services are today an important driver of trade: in the UK services account for around half of all exports; and in the Bahamas, almost all exports are services.

In other countries, such as Nigeria and Venezuela, services account for a small share of total exports.

Globally, trade in goods accounts for the majority of trade transactions. But as this chart shows, the share of services in total global exports has slightly increased in recent decades. 9

How are trade partnerships changing?

Bilateral trade is becoming increasingly common.

If we consider all pairs of countries that engage in trade around the world, we find that in the majority of cases, there is a bilateral relationship today: most countries that export goods to a country also import goods from the same country.

The interactive visualization shows this. 10 In the chart, all possible country pairs are partitioned into three categories: the top portion represents the fraction of country pairs that do not trade with one another; the middle portion represents those that trade in both directions (they export to one another); and the bottom portion represents those that trade in one direction only (one country imports from, but does not export to, the other country).

As we can see, bilateral trade is becoming increasingly common (the middle portion has grown substantially). However, many countries still do not trade with each other at all.

South-South trade is becoming increasingly important

The next visualization here shows the share of world merchandise trade that corresponds to exchanges between today's rich countries and the rest of the world.

The 'rich countries' in this chart are: Australia, Austria, Belgium, Canada, Cyprus, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom and the United States. 'Non-rich countries' are all the other countries in the world.

As we can see, up until the Second World War, the majority of trade transactions involved exchanges between this small group of rich countries. But this has changed quickly over the last couple of decades, and today, trade between non-rich countries is just as important as trade between rich countries.

In the past two decades, China has been a key driver of this dynamic: the UN Human Development Report (2013) estimates that between 1992 and 2011, China's trade with Sub-Saharan Africa rose from $1 billion to more than $140 billion. 11

The majority of preferential trade agreements are between emerging economies

The last few decades have not only seen an increase in the volume of international trade, but also an increase in the number of preferential trade agreements through which exchanges take place. A preferential trade agreement is a trade pact that reduces tariffs between the participating countries for certain products.

The visualization here shows the evolution of the cumulative number of preferential trade agreements in force worldwide, according to the World Trade Organization (WTO). These numbers include notified and non-notified preferential agreements (the source reports that only about two-thirds of the agreements currently in force have been notified to the WTO) and are disaggregated by country groups.

This figure shows the increasingly important role of trade between developing countries (South-South trade), vis-a-vis trade between developed and developing countries (North-South trade). In the late 1970s, North-South agreements accounted for more than half of all agreements – in 2010, they accounted for about one-quarter. Today, the majority of preferential trade agreements are between developing economies.

Trading patterns have been changing quickly in middle-income countries

An important change in the composition of exported goods in these countries has accompanied the increase in trade among emerging economies over the last half century.

The next visualization plots the share of food exports in each country's total exported merchandise. These figures, produced by the World Bank, correspond to the Standard International Trade Classification, in which 'food' includes, among other goods, live animals, beverages, tobacco, coffee, oils, and fats.

Two points stand out. First, the relative importance of food exports has substantially decreased in most countries since the 1960s (although globally, it has gone up slightly more recently). Second, this decrease has been largest in middle-income countries, particularly in Latin America.

Regarding levels, as one would expect, in high-income countries, food still accounts for a much smaller share of merchandise exports than in most low- and middle-income-countries.

Trade generates efficiency gains

The raw correlation between trade and growth.

Over the last couple of centuries, the world economy has experienced sustained positive economic growth , and over the same period, this process of economic growth has been accompanied by even faster growth in global trade .

In a similar way, if we look at country-level data from the last half century we find that there is also a correlation between economic growth and trade: countries with higher rates of GDP growth also tend to have higher rates of growth in trade as a share of output. This basic correlation is shown in the chart here, where we plot the average annual change in real GDP per capita, against growth in trade (average annual change in value of exports as a share of GDP). 12

Is this statistical association between economic output and trade causal?

Among the potential growth-enhancing factors that may come from greater global economic integration are: competition (firms that fail to adopt new technologies and cut costs are more likely to fail and be replaced by more dynamic firms); economies of scale (firms that can export to the world face larger demand, and under the right conditions, they can operate at larger scales where the price per unit of product is lower); learning and innovation (firms that trade gain more experience and exposure to develop and adopt technologies and industry standards from foreign competitors). 13

Are these mechanisms supported by the data? Let's take a look at the available empirical evidence.

Evidence from cross-country differences in trade, growth, and productivity

When it comes to academic studies estimating the impact of trade on GDP growth, the most cited paper is Frankel and Romer (1999). 14

In this study, Frankel and Romer used geography as a proxy for trade to estimate the impact of trade on growth. This is a classic example of the so-called instrumental variables approach . The idea is that a country's geography is fixed, and mainly affects national income through trade. So if we observe that a country's distance from other countries is a powerful predictor of economic growth (after accounting for other characteristics), then the conclusion is drawn that it must be because trade has an effect on economic growth. Following this logic, Frankel and Romer find evidence of a strong impact of trade on economic growth.

Other papers have applied the same approach to richer cross-country data, and they have found similar results. A key example is Alcalá and Ciccone (2004). 15

This body of evidence suggests trade is indeed one of the factors driving national average incomes (GDP per capita) and macroeconomic productivity (GDP per worker) over the long run. 16

Evidence from changes in labor productivity at the firm level

If trade is causally linked to economic growth, we would expect that trade liberalization episodes also lead to firms becoming more productive in the medium and even short run. There is evidence suggesting this is often the case.

Pavcnik (2002) examined the effects of liberalized trade on plant productivity in the case of Chile, during the late 1970s and early 1980s. She found a positive impact on firm productivity in the import-competing sector. She also found evidence of aggregate productivity improvements from the reshuffling of resources and output from less to more efficient producers. 17

Bloom, Draca, and Van Reenen (2016) examined the impact of rising Chinese import competition on European firms over the period 1996-2007 and obtained similar results. They found that innovation increased more in those firms most affected by Chinese imports. They also found evidence of efficiency gains through two related channels: innovation increased and new existing technologies were adopted within firms, and aggregate productivity also increased because employment was reallocated towards more technologically advanced firms. 18

Trade does not only increase efficiency gains

Overall, the available evidence suggests that trade liberalization does improve economic efficiency. This evidence comes from different political and economic contexts and includes both micro and macro measures of efficiency.

This result is important because it shows that there are gains from trade. But of course, efficiency is not the only relevant consideration here. As we discuss in a companion article , the efficiency gains from trade are not generally equally shared by everyone. The evidence from the impact of trade on firm productivity confirms this: "reshuffling workers from less to more efficient producers" means closing down some jobs in some places. Because distributional concerns are real it is important to promote public policies – such as unemployment benefits and other safety-net programs – that help redistribute the gains from trade.

Trade has distributional consequences

The conceptual link between trade and household welfare.

When a country opens up to trade, the demand and supply of goods and services in the economy shift. As a consequence, local markets respond, and prices change. This has an impact on households, both as consumers and as wage earners.

The implication is that trade has an impact on everyone. It's not the case that the effects are restricted to workers from industries in the trade sector; or to consumers who buy imported goods. The effects of trade extend to everyone because markets are interlinked, so imports and exports have knock-on effects on all prices in the economy, including those in non-traded sectors.

Economists usually distinguish between "general equilibrium consumption effects" (i.e. changes in consumption that arise from the fact that trade affects the prices of non-traded goods relative to traded goods) and "general equilibrium income effects" (i.e. changes in wages that arise from the fact that trade has an impact on the demand for specific types of workers, who could be employed in both the traded and non-traded sectors).

Considering all these complex interrelations, it's not surprising that economic theories predict that not everyone will benefit from international trade in the same way. The distribution of the gains from trade depends on what different groups of people consume, and which types of jobs they have, or could have. 19

The link between trade, jobs and wages

Evidence from chinese imports and their impact on factory workers in the us.

The most famous study looking at this question is Autor, Dorn and Hanson (2013): "The China syndrome: Local labor market effects of import competition in the United States". 20

In this paper, Autor and coauthors examined how local labor markets changed in the parts of the country most exposed to Chinese competition. They found that rising exposure increased unemployment, lowered labor force participation, and reduced wages. Additionally, they found that claims for unemployment and healthcare benefits also increased in more trade-exposed labor markets.

The visualization here is one of the key charts from their paper. It's a scatter plot of cross-regional exposure to rising imports, against changes in employment. Each dot is a small region (a 'commuting zone' to be precise). The vertical position of the dots represents the percent change in manufacturing employment for the working-age population, and the horizontal position represents the predicted exposure to rising imports (exposure varies across regions depending on the local weight of different industries).

The trend line in this chart shows a negative relationship: more exposure goes along with less employment. There are large deviations from the trend (there are some low-exposure regions with big negative changes in employment); but the paper provides more sophisticated regressions and robustness checks, and finds that this relationship is statistically significant.

This result is important because it shows that the labor market adjustments were large. Many workers and communities were affected over a long period of time. 21

But it's also important to keep in mind that Autor and colleagues are only giving us a partial perspective on the total effect of trade on employment. In particular, comparing changes in employment at the regional level misses the fact that firms operate in multiple regions and industries at the same time. Indeed, Ildikó Magyari found evidence suggesting the Chinese trade shock provided incentives for US firms to diversify and reorganize production. 22

So companies that outsourced jobs to China often ended up closing some lines of business, but at the same time expanded other lines elsewhere in the US. This means that job losses in some regions subsidized new jobs in other parts of the country.

On the whole, Magyari finds that although Chinese imports may have reduced employment within some establishments, these losses were more than offset by gains in employment within the same firms in other places. This is no consolation to people who lost their jobs. But it is necessary to add this perspective to the simplistic story of "trade with China is bad for US workers".

Evidence from the expansion of trade in India and the impact on poverty reductions

Another important paper in this field is Topalova (2010): "Factor immobility and regional impacts of trade liberalization: Evidence on poverty from India". 23

In this paper, Topalova examines the impact of trade liberalization on poverty across different regions in India, using the sudden and extensive change in India's trade policy in 1991. She finds that rural regions that were more exposed to liberalization experienced a slower decline in poverty and lower consumption growth.

Analyzing the mechanisms underlying this effect, Topalova finds that liberalization had a stronger negative impact among the least geographically mobile at the bottom of the income distribution and in places where labor laws deterred workers from reallocating across sectors.

The evidence from India shows that (i) discussions that only look at "winners" in poor countries and "losers" in rich countries miss the point that the gains from trade are unequally distributed within both sets of countries; and (ii) context-specific factors, like worker mobility across sectors and geographic regions, are crucial to understand the impact of trade on incomes.

Evidence from other studies

• Donaldson (2018) uses archival data from colonial India to estimate the impact of India’s vast railroad network. He finds railroads increased trade, and in doing so they increased real incomes (and reduced income volatility). 24
• Porto (2006) looks at the distributional effects of Mercosur on Argentine families, and finds this regional trade agreement led to benefits across the entire income distribution. He finds the effect was progressive: poor households gained more than middle-income households because prior to the reform, trade protection benefitted the rich disproportionately. 25
• Trefler (2004) looks at the Canada-US Free Trade Agreement and finds there was a group who bore "adjustment costs" (displaced workers and struggling plants) and a group who enjoyed "long-run gains" (consumers and efficient plants). 26

The link between trade and the cost of living

The fact that trade negatively affects labor market opportunities for specific groups of people does not necessarily imply that trade has a negative aggregate effect on household welfare. This is because, while trade affects wages and employment, it also affects the prices of consumption goods. So households are affected both as consumers and as wage earners.

Most studies focus on the earnings channel and try to approximate the impact of trade on welfare by looking at how much wages can buy, using as a reference the changing prices of a fixed basket of goods.

This approach is problematic because it fails to consider welfare gains from increased product variety, and obscures complicated distributional issues such as the fact that poor and rich individuals consume different baskets so they benefit differently from changes in relative prices. 27

Ideally, studies looking at the impact of trade on household welfare should rely on fine-grained data on prices, consumption, and earnings. This is the approach followed in Atkin, Faber, and Gonzalez-Navarro (2018): "Retail globalization and household welfare: Evidence from Mexico". 28

Atkin and coauthors use a uniquely rich dataset from Mexico, and find that the arrival of global retail chains led to reductions in the incomes of traditional retail sector workers, but had little impact on average municipality-level incomes or employment; and led to lower costs of living for both rich and poor households.

The chart here shows the estimated distribution of total welfare gains across the household income distribution (the light-gray lines correspond to confidence intervals). These are proportional gains expressed as a percent of initial household income.

As we can see, there is a net positive welfare effect across all income groups; but these improvements in welfare are regressive, in the sense that richer households gain proportionally more (about 7.5 percent gain compared to 5 percent). 29

Evidence from other countries confirms this is not an isolated case – the expenditure channel really seems to be an important and understudied source of household welfare. Giuseppe Berlingieri, Holger Breinlich, Swati Dhingra, for example, investigated the consumer benefits from trade agreements implemented by the EU between 1993 and 2013; and they found that these trade agreements increased the quality of available products, which translated into a cumulative reduction in consumer prices equivalent to savings of €24 billion per year for EU consumers. 30

Implications of trade’s distributional effects

The available evidence shows that, for some groups of people, trade has a negative effect on wages and employment opportunities; at the same time, it has a large positive effect via lower consumer prices and increased product availability.

Two points are worth emphasizing.

For some households, the net effect is positive. But for some households that's not the case. In particular, workers who lose their jobs can be affected for extended periods of time, so the positive effect via lower prices is not enough to compensate them for the reduction in earnings.

On the whole, if we aggregate changes in welfare across households, the net effect is usually positive. But this is hardly a consolation for the worse off.

This highlights a complex reality: There are aggregate gains from trade , but there are also real distributional concerns. Even if trade is not a major driver of income inequalities , it's important to keep in mind that public policies, such as unemployment benefits and other safety-net programs, can and should help redistribute the gains from trade.

Explaining trade patterns: Theory and Evidence

Comparative advantage, theory: what is 'comparative advantage' and why does it matter to understand trade.

In economic theory, the 'economic cost' – or the 'opportunity cost' – of producing a good is the value of everything you need to give up in order to produce that good.

Economic costs include physical inputs (the value of the stuff you use to produce the good), plus forgone opportunities (when you allocate scarce resources to a task, you give up alternative uses of those resources).

A country or a person is said to have a 'comparative advantage' if it can produce something at a lower opportunity cost than its trade partners.

The forgone opportunities of production are key to understanding this concept. It is precisely this that distinguishes absolute advantage from comparative advantage.

To see the difference between comparative and absolute advantage, consider a commercial aviation pilot and a baker. Suppose the pilot is an excellent chef, and she can bake just as well, or even better than the baker. In this case, the pilot has an absolute advantage in both tasks. Yet the baker probably has a comparative advantage in baking, because the opportunity cost of baking is much higher for the pilot.

The freely available economics textbook The Economy: Economics for a Changing World explains this as follows: "A person or country has comparative advantage in the production of a particular good, if the cost of producing an additional unit of that good relative to the cost of producing another good is lower than another person or country’s cost to produce the same two goods."

At the individual level, comparative advantage explains why you might want to delegate tasks to someone else, even if you can do those tasks better and faster than them. This may sound counterintuitive, but it is not: If you are good at many things, it means that investing time in one task has a high opportunity cost, because you are not doing the other amazing things you could be doing with your time and resources. So, at least from an efficiency point of view, you should specialize on what you are best at, and delegate the rest.

The same logic applies to countries. Broadly speaking, the principle of comparative advantage postulates that all nations can gain from trade if each specializes in producing what they are relatively more efficient at producing, and imports the rest: “do what you do best, import the rest”. 31

In countries with a relative abundance of certain factors of production, the theory of comparative advantage predicts that they will export goods that rely heavily upon those factors: a country typically has a comparative advantage in those goods that use its abundant resources. Colombia exports bananas to Europe because it has comparatively abundant tropical weather.

Is there empirical support for comparative-advantage theories of trade?

The empirical evidence suggests that the principle of comparative advantage does help explain trade patterns. Bernhofen and Brown (2004) 32 , for instance, provide evidence using the experience of Japan. Specifically, they exploit Japan’s dramatic nineteenth-century move from a state of near complete isolation to wide trade openness.

The graph here shows the price changes of the key tradable goods after the opening up to trade. It presents a scatter diagram of the net exports in 1869 graphed in relation to the change in prices from 1851–53 to 1869. As we can see, this is consistent with the theory: after opening to trade, the relative prices of major exports such as silk increased (Japan exported what was cheap for them to produce and which was valuable abroad), while the relative price of imports such as sugar declined (they imported what was relatively more difficult for them to produce, but was cheap abroad).

Trade diminishes with distance

The resistance that geography imposes on trade has long been studied in the empirical economics literature – and the main conclusion is that trade intensity is strongly linked to geographic distance.

The visualization, from Eaton and Kortum (2002), graphs 'normalized import shares' against distance. 33 Each dot represents a country pair from a set of 19 OECD countries, and both the vertical and horizontal axes are expressed on logarithmic scales.

The 'normalized import shares' in the vertical axis provide a measure of how much each country imports from different partners (see the paper for details on how this is calculated and normalized), while the distance in the horizontal axis corresponds to the distance between central cities in each country (see the paper and references therein for details on the list of cities). As we can see, there is a strong negative relationship. Trade diminishes with distance. Through econometric modeling, the paper shows that this relationship is not just a correlation driven by other factors: their findings suggest that distance imposes a significant barrier to trade.

The fact that trade diminishes with distance is also corroborated by data on trade intensity within countries. The visualization here shows, through a series of maps, the geographic distribution of French firms that export to France's neighboring countries. The colors reflect the percentage of firms that export to each specific country.

As we can see, the share of firms exporting to each of the corresponding neighbors is the largest close to the border. The authors also show in the paper that this pattern holds for the value of individual-firm exports – trade value decreases with distance to the border.

Institutions

Conducting international trade requires both financial and non-financial institutions to support transactions. Some of these institutions are fairly obvious (e.g. law enforcement); but some are less obvious. For example, the evidence shows that producers in exporting countries often need credit in order to engage in trade.

The scatter plot, from Manova (2013), shows the correlation between levels in private credit (specifically exporters’ private credit as a share of GDP) and exports (average log bilateral exports across destinations and sectors). 35 As can be seen, financially developed economies – those with more dynamic private credit markets – typically outperform exporters with less evolved financial institutions.

Other studies have shown that country-specific institutions, like the knowledge of foreign languages, for instance, are also important to promote foreign relative to domestic trade. 36

Increasing returns to scale

The concept of comparative advantage predicts that if all countries had identical endowments and institutions, there would be little incentive for specialization because the opportunity cost of producing any good would be the same in every country.

So you may wonder: why is it then the case that in the last few years, we have seen such rapid growth in intra-industry trade between rich countries?

The increase in intra-industry between rich countries seems paradoxical under the light of comparative advantage because in recent decades we have seen convergence in key factors, such as human capital , across these countries.

The solution to the paradox is actually not very complicated: Comparative advantage is one, but not the only force driving incentives to specialization and trade.

Several economists, most notably Paul Krugman, have developed theories of trade in which trade is not due to differences between countries, but instead due to "increasing returns to scale" – an economic term used to denote a technology in which producing extra units of a good becomes cheaper if you operate at a larger scale.

The idea is that specialization allows countries to reap greater economies of scale (i.e. to reduce production costs by focusing on producing large quantities of specific products), so trade can be a good idea even if the countries do not differ in endowments, including culture and institutions.

These models of trade, often referred to as “New Trade Theory”, are helpful in explaining why in the last few years we have seen such rapid growth in two-way exchanges of goods within industries between developed nations.

In a much-cited paper, Evenett and Keller (2002) show that both factor endowments and increasing returns help explain production and trade patterns around the world. 37

You can learn more about New Trade Theory, and the empirical support behind it, in Paul Krugman's Nobel lecture .

Measurement and data quality

There are dozens of official sources of data on international trade, and if you compare these different sources, you will find that they do not agree with one another. Even if you focus on what seems to be the same indicator for the same year in the same country, discrepancies are large.

Such differences between sources can also be found in rich countries where statistical agencies tend to follow international reporting guidelines more closely.

There are also large bilateral discrepancies within sources: the value of goods that country A exports to country B can be more than the value of goods that country B imports from country A.

Here we explain how international trade data is collected and processed, and why there are such large discrepancies.

What data is available?

The data hubs from several large international organizations publish and maintain extensive cross-country datasets on international trade. Here's a list of the most important ones:

• World Bank Open Data
• WTO Statistics
• UN Comtrade
• UNCTAD World Integrated Trade Solutions

In addition to these sources, there are also many other academic projects that publish data on international trade. These projects tend to rely on data from one or more of the sources above, and they typically process and merge series in order to improve coverage and consistency. Three important sources are:

• The Correlates of War Project . 38
• The NBER-United Nations Trade Dataset Project .
• The CEPII Bilateral Trade and Gravity Data Project . 39

How large are the discrepancies between sources?

In the visualization here, we compare the data published by several of the sources listed above, country by country, from 1955 to today.

For each country, we exclude trade in services, and we focus only on estimates of the total value of exported goods, expressed as shares of GDP. 40

As this chart clearly shows, different data sources often tell very different stories. If you change the country or region shown you will see that this is true, to varying degrees, across all countries and years.

Constructing this chart was demanding. It required downloading trade data from many different sources, collecting the relevant series, and then standardizing them so that the units of measure and the geographical territories were consistent.

All series, except the two long-run series from CEPII and NBER-UN, were produced from data published by the sources in current US dollars and then converted to GDP shares using a unique source (World Bank).

So, if all series are in the same units (share of national GDP) and they measure the same thing (value of goods exported from one country to the rest of the world), what explains the differences?

Let's dig deeper to understand what's going on.

Why doesn't the data add up?

Differences in guidelines used by countries to record and report trade data.

Broadly speaking, there are two main approaches used to estimate international merchandise trade:

• The first approach relies on estimating trade from customs records , often complementing or correcting figures with data from enterprise surveys and administrative records associated with taxation. The main manual providing guidelines for this approach is the International Merchandise Trade Statistics Manual (IMTS).
• The second approach relies on estimating trade from macroeconomic data , typically National Accounts . The main manual providing guidelines for this approach is the Balance of Payments and International Investment Position Manual (BPM6), which was drafted in parallel with the 2008 System of National Accounts of the United Nations (SNA 2008). The idea behind this approach is to record changes in economic ownership. 41

Under these two approaches, it is common to distinguish between 'traded merchandise' and 'traded goods'. The distinction is often made because goods simply being transported through a country (i.e., goods in transit) are not considered to change a country's stock of material resources and are hence often excluded from the more narrow concept of 'merchandise trade'.

Also, adding to the complexity, countries often rely on measurement protocols developed alongside approaches and concepts that are not perfectly compatible to begin with. In Europe, for example, countries use the 'Compilers guide on European statistics on international trade in goods'.

Measurement error and other inconsistencies

Even when two sources rely on the same broad accounting approach, discrepancies arise because countries fail to adhere perfectly to the protocols.

In theory, for example, the exports of country A to country B should mirror the imports of country B from country A. But in practice this is rarely the case because of differences in valuation. According to the BPM6, imports, and exports should be recorded in the balance of payments accounts on a ' free on board (FOB) basis', which means using prices that include all charges up to placing the goods on board a ship at the port of departure. Yet many countries stick to FOB values only for exports, and use CIF values for imports (CIF stands for 'Cost, Insurance and Freight', and includes the costs of transportation). 42

The chart here gives you an idea of how large import-export asymmetries are. Shown are the differences between the value of goods that each country reports exporting to the US, and the value of goods that the US reports importing from the same countries. For example, for China, the figure in the chart corresponds to the “Value of merchandise imports in the US from China” minus the “Value of merchandise exports from China to the US”.

The differences in the chart here, which are both positive and negative, suggest that there is more going on than differences in FOB vs. CIF values. If all asymmetries were coming from FOB-CIF differences, then we should only see positive values in the chart (recall that, unlike FOB values, CIF values include the cost of transportation, so CIF values are larger).

What else may be going on here?

Another common source of measurement error relates to the inconsistent attribution of trade partners. An example is failure to follow the guidelines on how to treat goods passing through intermediary countries for processing or merchanting purposes. As global production chains become more complex, countries find it increasingly difficult to unambiguously establish the origin and final destination of merchandise, even when rules are established in the manuals. 43

And there are still more potential sources of discrepancies. For example differences in customs and tax regimes, and differences between "general" and "special" trade systems (i.e. differences between statistical territories and actual country borders, which do not often coincide because of things like 'custom free zones'). 44

Even when two sources have identical trade estimates, inconsistencies in published data can arise from differences in exchange rates. If a dataset reports cross-country trade data in US dollars, estimates will vary depending on the exchange rates used. Different exchange rates will lead to conflicting estimates, even if figures in local currency units are consistent.

A checklist for comparing sources

Asymmetries in international trade statistics are large and arise for a variety of reasons. These include conceptual inconsistencies across measurement standards and inconsistencies in the way countries apply agreed-upon protocols. Here's a checklist of issues to keep in mind when comparing sources.

• Differences in underlying records: is trade measured from National Accounts data rather than directly from custom or tax records?
• Differences in import and export valuations: are transactions valued at FOB or CIF prices?
• Inconsistent attribution of trade partners: how is the origin and final destination of merchandise established?
• Difference between 'goods' and 'merchandise': how are re-importing, re-exporting, and intermediary merchanting transactions recorded?
• Exchange rates: how are values converted from local currency units to the currency that allows international comparisons (most often the US-$)?
• Differences between 'general' and 'special' trade system: how is trade recorded for custom-free zones?
• Other issues: Time of recording, confidentiality policies, product classification, deliberate mis-invoicing for illicit purposes.

Many organizations producing trade data have long recognized these factors. Indeed, international organizations often incorporate corrections in an attempt to improve data quality.

The OECD's Balanced International Merchandise Trade Statistics , for example, uses its own approach to correct and reconcile international merchandise trade statistics. 45

The corrections applied in the OECD's 'balanced' series make this the best source for cross-country comparisons. However, this dataset has low coverage across countries, and it only goes back to 2011. This is an important obstacle since the complex adjustments introduced by the OECD imply we can't easily improve coverage by appending data from other sources. At Our World in Data we have chosen to rely on CEPII as the main source for exploring long-run changes in international trade, but we also rely on World Bank and OECD data for up-to-date cross-country comparisons.

There are two key lessons from all of this. The first lesson is that, for most users of trade data out there, there is no obvious way of choosing between sources. And the second lesson is that, because of statistical glitches, researchers and policymakers should always take analyses of trade data with a pinch of salt. For example, in a recent high-profile report , researchers attributed mismatches in bilateral trade data to illicit financial flows through trade mis-invoicing (or trade-based money laundering). As we show here, this interpretation of the data is not appropriate, since mismatches in the data can, and often do arise from measurement inconsistencies rather than malfeasance. 46

Hopefully, the discussion and checklist above can help researchers better interpret and choose between conflicting data sources.

Interactive charts on Trade and Globalization

The openness index, when calculated for the world as a whole, includes double-counting of transactions: When country A sells goods to country B, this shows up in the data both as an import (B imports from A) and as an export (A sells to B).

Indeed, if you compare the chart showing the global trade openness index and the chart showing global merchandise exports as a share of GDP , you find that the former is almost twice as large as the latter.

Why is the global openness index not exactly twice the value reported in the chart plotting global merchandise exports? There a three reasons.

First, the global openness index uses different sources. Second, the global openness index includes trade in goods and services, while merchandise exports include goods but not services. And third, the amount that country A reports exporting to country B does not usually match the amount that B reports importing from A.

We explore this in more detail in our measurement section below .

Klasing and Milionis (2014), one of the sources in the chart, published an additional set of estimates under an alternative specification. Similarly, for the period 1960-2015, the World Bank's World Development Indicators published an alternative set of estimates similar but not identical to those included from the Penn World Tables (9.1). You find all these alternative overlapping sources in this comparison chart .

Leonor Freire Costa, Nuno Palma, and Jaime Reis (2015) – The great escape? The contribution of the empire to Portugal's economic growth, 1500–1800 Leonor Freire Costa Nuno Palma Jaime Reis European Review of Economic History, Volume 19, Issue 1, 1 February 2015, Pages 1–22, https://doi.org/10.1093/ereh/heu019

Broadberry and O'Rourke (2010) - The Cambridge Economic History of Modern Europe: Volume 2, 1870 to the Present. Cambridge University Press.

Integration in the goods markets is measured here through the 'trade openness index', which is defined by the sum of exports and imports as a share of GDP. In our interactive chart you can explore trends in trade openness over this period for a selection of European countries.

Broadberry and O'Rourke (2010) - The Cambridge Economic History of Modern Europe: Volume 2, 1870 to the Present. Cambridge University Press. The graph depicts the “evolution of three indicators measuring integration in commodity, labor, and capital markets over the long run. Commodity market integration is measured by computing the ratio of exports to GDP. Labor market integration is measured by dividing the migratory turnover by population. Financial integration is measured using Feldstein–Horioka estimators of current account disconnectedness.”

We also have the same chart but showing imports .

We also have the same chart, but showing imports .

This interactive chart shows trade in services as a share of GDP across countries and regions.

This chart was inspired by a chart from Helpman, E., Melitz, M., & Rubinstein, Y. (2007). Estimating trade flows: Trading partners and trading volumes (No. w12927). National Bureau of Economic Research.

We also have the same data, but as a stacked-area chart .

There are different ways of capturing this correlation. I focus here on all countries with data over the period 1945-2014. You can find a similar chart using different data sources and time periods in Ventura, J. (2005). A global view of economic growth. Handbook of economic growth, 1, 1419-1497. Online here .

The textbook The Economy: Economics for a Changing World explains this in more detail.

Frankel, J. A., & Romer, D. H. (1999). Does trade cause growth? American Economic Review, 89(3), 379-399.

Alcalá, F., & Ciccone, A. (2004). Trade and productivity . The Quarterly Journal of Economics, 119(2), 613-646.

There are many papers that try to answer this specific question with macro data. For an overview of papers and methods see: Durlauf, S. N., Johnson, P. A., & Temple, J. R. (2005). Growth econometrics. Handbook of economic growth, 1, 555-677.

Pavcnik, N. (2002). Trade liberalization, exit, and productivity improvements: Evidence from Chilean plants . The Review of Economic Studies, 69(1), 245-276.

Bloom, N., Draca, M., & Van Reenen, J. (2016). Trade induced technical change? The impact of Chinese imports on innovation, IT and productivity. The Review of Economic Studies, 83(1), 87-117. Available online here .

You can read more about these economic concepts, and the related predictions from economic theory, in Chapter 18 of the textbook The Economy: Economics for a Changing World .

David, H., Dorn, D., & Hanson, G. H. (2013). The China syndrome: Local labor market effects of import competition in the United States . American Economic Review, 103(6), 2121-68.

It's important to mention here that the economist Jonathan Rothwell wrote a paper suggesting these findings are the result of a statistical illusion. Rothwell's critique received some attention from the media , but Autor and coauthors provided a reply , which I think successfully refutes this claim.

Magyari, I. (2017). Firm Reorganization, Chinese Imports, and US Manufacturing Employment . US Census Bureau, Center for Economic Studies.

Topalova, P. (2010). Factor immobility and regional impacts of trade liberalization: Evidence on poverty from India . American Economic Journal: Applied Economics, 2(4), 1-41.

Donaldson, D. (2018). Railroads of the Raj: Estimating the impact of transportation infrastructure . American Economic Review, 108(4-5), 899-934.

Porto, G (2006). Using Survey Data to Assess the Distributional Effects of Trade Policy. Journal of International Economics 70 (2006) 140–160.

Trefler, D. (2004). The long and short of the Canada-US free trade agreement . American Economic Review, 94(4), 870-895.

See: (i) Feenstra, R. C., & Weinstein, D. E. (2017). Globalization, markups, and US welfare . Journal of Political Economy, 125(4), 1040-1074. (ii) Fajgelbaum, P. D., & Khandelwal, A. K. (2016). Measuring the unequal gains from trade . The Quarterly Journal of Economics, 131(3), 1113-1180.

Atkin, David, Benjamin Faber, and Marco Gonzalez-Navarro. "Retail globalization and household welfare: Evidence from Mexico." Journal of Political Economy 126.1 (2018): 1-73.

In the paper, Atkin and coauthors explore the reasons for this and find that the regressive nature of the distribution is mainly due to richer households placing higher weight on the product variety and shopping amenities on offer at these new foreign stores.

Berlingieri, G., Breinlich, H., & Dhingra, S. (2018). The Impact of Trade Agreements on Consumer Welfare—Evidence from the EU Common External Trade Policy. Journal of the European Economic Association.

Nobel laureate Paul Samuelson (1969) was once challenged by the mathematician Stanislaw Ulam: "Name me one proposition in all of the social sciences which is both true and non-trivial." It was several years later than he thought of the correct response: comparative advantage. "That it is logically true need not be argued before a mathematician; that is is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them."

(NB. This is an excerpt from https://www.wto.org/english/res_e/reser_e/cadv_e.htm)

Bernhofen, D., & Brown, J. (2004). A Direct Test of the Theory of Comparative Advantage: The Case of Japan. Journal of Political Economy, 112(1), 48-67. doi:1. Retrieved from http://www.jstor.org/stable/10.1086/379944 doi:1

Eaton, J., & Kortum, S. (2002). Technology, geography, and trade. Econometrica, 70(5), 1741-1779.

Crozet, M., & Koenig, P. (2010). Structural Gravity Equations with Intensive and Extensive Margins. The Canadian Journal of Economics / Revue Canadienne D'Economique, 43(1), 41-62. Retrieved from http://www.jstor.org/stable/40389555

Manova, Kalina. "Credit constraints, heterogeneous firms, and international trade." The Review of Economic Studies 80.2 (2013): 711-744.

Melitz, J. (2008). Language and foreign trade. European Economic Review, 52(4), 667-699.

Evenett, S. J., & Keller, W. (2002). On theories explaining the success of the gravity equation . Journal of Political Economy, 110(2), 281-316.

For more information on how the COW trade datasets were constructed see: (i) Barbieri, Katherine, and Omar M. G. Omar Keshk. 2016. Correlates of War Project Trade Data Set Codebook, Version 4.0. Available at http://correlatesofwar.org and (ii) Barbieri, Katherine, Omar M. G. Keshk, and Brian Pollins. 2009. TRADING DATA: Evaluating our Assumptions and Coding Rules. Conflict Management and Peace Science, 26(5): 471–491.

Further information on CEPII's methodology can be found in their working paper .

The chart includes series labeled by the sources as 'merchandise trade' and 'goods trade'. As we explain below, part of the asymmetries in trade data comes from the fact that, although 'merchandise' and 'goods' are equivalent in the dictionary, these two terms often measure related but different things.

For example, if there is no change in ownership (e.g. a firm exports goods to its factory in another country for processing, and then re-imports the processed goods) the manual says that statistical agencies should only record the net difference in value. You can find more details about this in an OECD Statistics Briefing .

This issue is actually also a source of disagreement between National Accounts data and customs data. You can read more about it in this report: Harrison, Anne (2013) FOB/CIF Issue in Merchandise Trade/Transport of Goods in BPM6 and the 2008 SNA, Twenty-Fifth Meeting of the IMF Committee on Balance of Payments Statistics, Washington, D.C .

Precisely because of the difficulty that arises when trying to establish the origin and final destination of merchandise, some sources distinguish between national and dyadic (i.e. 'directed') trade estimates.

For more details about general and special trade see the Eurostat glossary .

The OECD approach consists of four steps, which they describe as follows: "First, data are collected and organized, and imports are converted to FOB prices to match the valuation of exports. Secondly, data are adjusted for several specific large problems known to drive asymmetries. Presently these include “modular” adjustments for unallocated and confidential trade; for exports by Hong Kong, China; for Swiss non-monetary gold; and for clear-cut cases of product misclassifications. The list of modules is expected to grow over time. In the third step, adjusted data are balanced using a “Symmetry Index” that weights exports and imports. As the final step, the data are also converted to Classification of Products by Activity (CPA) products to better align with National Accounts statistics, such as in national Supply-Use tables." You can read more about it here . In addition to the OECD, other sources also use corrections. The IMF's DOTS dataset, for example, uses a 6 percent rule for converting import valuations (in CIF) into export values (in FOB). More information can be found in the IMF's (2018) working paper on 'New Estimates for Direction of Trade Statistics'.

For more details on this see Forstater, M. (2018) Illicit Financial Flows, Trade Misinvoicing, and Multinational Tax Avoidance: The Same or Different? , CGD Policy Paper 123.

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The Geography of Transport Systems

The spatial organization of transportation and mobility

7.2 – Globalization and International Trade

Author: dr. jean-paul rodrigue.

International trade is an exchange of goods or services across national jurisdictions subject to regulatory oversight and taxation. Inbound trade is defined as imports and outbound trade is defined as exports.

1. The Flows of Globalization

In a global economy, no nation is self-sufficient , which is associated with specific exchanges of goods, people, and information . Each nation is involved at different levels in trade to sell what it produces, acquire what it lacks, and produce more efficiently in some economic sectors than its trade partners. International trade, or long-distance trade, has taken place for centuries, with some ancient trade routes predating history. Trade is an integral part of economic and cultural history, as ancient trade routes such as the  Silk Road can testify. Historically, trade was limited both by the demand and the capacity to transport cost-effectively goods having a market value at the destination. Commercial and technological developments have allowed trade to occur at an ever-increasing scale over the last 600 years . By the mid-19th century, trade was taking an increasingly active role in the economic life of nations and regions, and after the mid-20th century, trade became an active tool of economic globalization.

International trade is an expansion of the market (or exchange) principle at a scale beyond the region or the nation. It should take place only if there is a benefit for the partners involved, underlining that the rationale for trade can be a convenience but also a necessity . It is for convenience, as supported by conventional economic theory , when trade promotes economic efficiency by providing a wider variety of goods, often at lower costs. This is because of specialization, economies of scale, and the related comparative advantages. Trade is a necessity when it enables a nation to acquire goods that would otherwise not be available in a national economy, such as energy, raw minerals, or even agricultural goods. However, the benefits of trade can be subject to contention with several theoretical foundations of international trade have been articulated to explain its rationale:

• Mercantilism . A trading system where a nation tries to impose a positive trade balance (more exports than imports, particularly value-wise) on other nations to favor wealth accumulation. This system was prevalent during the colonial era and was often undertaken by charter companies receiving a monopoly on trade. Mercantilism represents the antithesis of free trade since trade relations are controlled and aligned to benefit one partner at the expense of others, implying that what can be traded, the conditions, and the partners involved are regulated. Still, mercantilism established the foundations of a global trading system, albeit an unequal one.
• Neomercantilism . A more recent trade system that leans on setting up a positive trade balance to meet economic development goals through control of the cost structure. Export-oriented strategies can be considered a form of neomercantilism, particularly if a government puts forward an incentive and subsidy system (e.g. free trade zones), which confers additional advantages to the factors of production. Neomercantilism can also be a response by some governments to the competitive and disruptive consequences of free trade, particularly if the trade partners are engaged in neo-mercantilist strategies. The outcomes are tariff and non-tariff measures regulating trade and protecting national commercial sectors, which are forms of protectionism. Therefore, neo-mercantilist strategies can be controversial and subject to contention.
• Absolute advantages . A free trade mechanism relying on a nation (or a firm) being able to produce more effectively in an economic sector while using fewer resources (e.g. capital, labor) than any other potential competitors. Therefore, It has an absolute advantage. Global efficiency can thus be improved with trade as a nation can focus on its absolute advantages, trade its surplus, and import what it lacks. The drawback of this perspective is that, in theory, nations having no absolute advantages should not be involved in trading since they may have little to gain from it. Absolute advantages tend to be an enduring characteristic , particularly for resources such as energy. Large producers keep an advantage as long as a resource is available or has a market.
• Comparative advantages . Even if a nation (or a firm) has absolute advantages over a wide array of economic sectors, it can focus on the sectors it has the highest comparative advantages (the difference between its production costs and those of its competitors) and import goods in sectors it has less comparative advantages. Comparative productivity increases the total production level since even if a nation (or a firm) has no absolute advantages, it can focus on sectors where the total productivity gains are the most significant. Comparative advantage can also be the outcome of economies of scale applied to a product or sector where the resulting lower costs provide competitiveness. Comparative advantages tend to be a temporary characteristic that can change with the evolution of labor costs and technology.
• Factor endowments . Expands the perspective of the comparative advantages by underlining that trade is related to the factor endowments of a nation, the most basic being capital , land , and labor . A nation will export goods to which it has notable factor endowments and import goods to which it has scarce factor endowments. As such, nations with low-cost labor available will focus on labor-intensive activities, while nations with high capital endowments will focus on capital-intensive activities. Factor endowments can be improved through capital and human resources investments.

The globalization of production is concurrent with the globalization of trade , as one cannot function without the other. This process has been facilitated by significant technical changes in the transport sector. The  scale , volume, and efficiency of international trade have all continued to increase since the 1970s. As such,  global space/time convergence was an ongoing process that implied a more extensive market coverage that could be accessed in less time. It has become increasingly possible to trade between parts of the world that previously had limited access to international transportation systems. Further, the division and the fragmentation of production that went along with these processes also expanded trade. Trade thus contributes to lower manufacturing costs .

Without international trade, few nations could maintain an adequate standard of living, particularly those of smaller size. With only domestic resources being available, each country could only produce a limited number of products, and scarcity would be prevalent. Global trade allows for an enormous variety of resources – from Persian Gulf oil, Brazilian coffee to Chinese labor – to be more widely accessible. Each item being traded is subject to an internationally recognized classification ( Standard International Trade Classification ; SITC), allowing nations to identify goods and the extent they are subject to tariffs and duties. Clear categorization also facilitates the distribution of a wide range of manufactured goods produced in different parts of the world to global markets. Wealth becomes increasingly derived through the regional specialization of economic activities. This way, production costs are lowered, productivity rises, and surpluses are generated, which can be transferred or traded for commodities that would be too expensive to produce domestically (convenience) or would not be available (necessity). As a result, international trade decreases the overall costs of production. Consumers can buy more goods from the wages they earn, and living standards should, in theory, increase.

International trade demonstrates the extent of globalization with increased  spatial interdependencies between elements of the global economy and their level of integration. These interdependencies imply numerous relationships where flows of capital, goods, raw materials, people, and services are established between world regions. International trade is also subject to much contention since it can, at times, be a disruptive economic and social force. It changes the conditions in which wealth is distributed within a national economy, particularly due to changes in prices, wages, and employment sectors. One challenge concerns the substitution of labor and capital . While in a simple economy, labor and capital (infrastructures) can be reconverted to other uses, in complex economies, labor and capital cannot be easily reallocated. Therefore, trade can, at the same time, lead to more goods being available at a lower price but with enduring unemployment and decaying infrastructures (unused factories and real estate). In turn, this can incite economies to adopt protectionist policies since this transition is considered too disruptive.

2. The Setting of the Contemporary Global Trade System

International trade, in terms of value and tonnage, has been a growing trend in the global economy. When looking at the structure of global trade, it is important to underline that it is not nations that are trading, but mainly corporations with the end products consumed in majority by individuals . A nation is a regulatory and jurisdictional unit where data is collected since freight crossing boundaries is subject to customs oversight and tabulated as trade flows. Inter and Intra corporate trade that takes place across national jurisdictions is accounted for as international trade. The emergence of the current structure of global trade can mainly be articulated within three major phases :

• First phase (immobile factors of production) . Concerns a conventional perspective on international trade that prevailed until the 1970s, when factors of production were much less mobile. Prior to the end of World War I, global trade was mainly structured by colonial relations but was fairly unregulated. There was limited mobility of raw materials, parts, and finished products. Developments in transport technology in the shipping and rail sectors allowed for greater volumes and distances to be covered. After World War I, international trade became fairly regulated, with impediments such as tariffs, quotas, and limitations to foreign ownership. Trade mainly concerned a range of specific products, namely commodities (and very few services) that were not readily available in regional economies. Due to regulations, protectionism, and relatively high transportation costs, trade remained limited and delayed by inefficient freight distribution. It was challenging to coordinate production and distribution. In this context, trade was more an exercise to cope with scarcity than to promote economic efficiency.
• Second phase (mobility of factors of production) . From the 1970s to the 1990s, the mobility of factors of production, particularly capital, became possible. The legal and physical environment in which international trade was taking place led to a better realization of the comparative advantages of specific locations. Concomitantly, regional trade agreements emerged, and the global trade framework was strengthened from a legal and transactional standpoint (GATT/WTO). In addition, containerization provided the capabilities to support more complex long-distance trade flows, as did the growing air traffic. Due to high production (legacy) costs in old industrial regions, labor-intensive activities were gradually relocated to lower-cost locations, which came to be known as offshoring . The process began nationally, went to nearby countries when possible, and became a global phenomenon afterward. Thus, foreign direct investments surged, particularly towards new manufacturing regions, as multinational corporations became increasingly flexible in the global positioning of their assets. The trade of finished and intermediate goods surged.
• Third phase (global value chains ). There is a growth in international trade, now including a wide variety of services that were previously fixed to regional markets, and a surge in the mobility of the factors of production. Since these trends are well established, the priority is shifting to the geographical and functional integration of production, distribution, and consumption with the emergence of global value chains. Complex networks involving flows of information, commodities, parts, and finished goods have been set, which in turn demands a high level of command of logistics and freight distribution. In such an environment, powerful actors have emerged who are not directly involved in the function of production and retailing, but mainly take the responsibility of managing the web of flows. International trade is becoming increasingly supported by digital technologies, allowing for more efficient transactions, compliance with regulations, and the management of transportation and logistics assets supporting trade.

The global economic system is thus characterized by a growing level of integrated services, finance, retail, manufacturing, and distribution. This is mainly the outcome of improved transport and logistics , more efficient exploitation of regional comparative advantages , and a  transactional environment supportive of the legal and financial complexities of global trade. International trade requires a full array of services related to distribution and transactions. The volume of exchanged goods and services between nations is taking a growing share of wealth generation, mainly by offering economic growth opportunities in new regions and reducing the costs of a wide array of manufacturing goods. By 2007, international trade surpassed 50% of global GDP for the first time, a twofold increase in its share since 1950. This share has fluctuated but remains in the 45-50% range.

3. Trade Costs and Facilitation

Trade facilitation involves how the procedures regulating the international movements of goods can be improved so that actors involved in international trade have more efficient formalities.

For regulatory authorities, trade facilitation improves their effectiveness as well as reduces the risk of customs duty evasion. It relies on reducing the general costs of trade, which considers transaction, tariff, transport, and time costs, also known as the “Four Ts” in international trade . These trade costs are derived from two primary sources:

• Separation factors . These are usually exogenous factors separating two trade partners, such as distance, transportation costs, travel time, as well as common attributes shared by trade partners. These usually involve being part of an economic agreement (e.g. a free trade zone), which is facilitated when partners have a common border.
• Country-specific factors . Endogenous to factors related to the origin or the destination of trade. This usually involves customs procedures (tariff and non-tariff factors), the overall performance of the national transport and logistics sector, and how well an economy is connected to the international transport system through its gateways (mostly ports and airports).

United Nations estimates have underlined that for developing countries, a 10% reduction in transportation costs could be accompanied by a growth of about 20% in international and domestic trade. Thus, the ability to compete in a global economy is dependent on the transport system as well as a trade facilitation framework that includes measures related to economic integration, the capabilities of international transportation systems, and the ease of negotiating and settling transactions.

The quality, cost, and efficiency of trade services influence the trading environment as well as the overall costs linked with the international trade of goods. Many factors have been conducive to trade facilitation in recent decades:

• Integration processes , such as the emergence of economic blocks and the decrease of tariffs at a global scale through agreements , promoted trade as regulatory regimes were harmonized. Still, customs fraud remains an issue, particularly in the least developed economies. One straightforward measure of integration relates to  custom delays , which can be a significant trade impediment since it adds uncertainty to supply chain management. The higher the level of economic integration, the more likely the concerned elements are to trade. International trade has consequently been facilitated by factors linked to growing  levels of economic integration , the outcome of processes such as the European Union or the North American Free Trade Agreement. The transactional capacity is consequently facilitated by the  development of transportation networks and the adjustment of trade flows that follow increased integration. Integration processes have also taken place at the local scale with the creation of free zones where an area is given a different governance structure in order to promote trade, particularly export-oriented activities. In this case, the integration process is not uniform, as only a portion of an area is involved. China is a salient example of the far-reaching impacts of the setting of special economic zones operating under a different regulatory regime.
• Standardization concerns setting a common and ubiquitous frame of reference over information and physical flows. Standards facilitate trade since those abiding by them benefit from reliable, interoperable, and compatible goods and services, often resulting in lower production, distribution, and maintenance costs. Measurement units were among the first globally accepted standards (metric system), and the development of information technologies eventually led to common operating and telecommunication systems. However, it is the container that is considered to be the most significant international standard for trade facilitation. By offering a load unit that can be handled by any mode and terminal with the proper equipment, access to international trade is improved.
• Production systems are more flexible and embedded. Maintaining a network of geographically diversified inputs is effectively productive, which favors exchanges of commodities, parts, and services. Information technologies have played a role in facilitating transactions and managing complex business operations. Foreign direct investments are commonly linked with the globalization of production as corporations invest abroad in search of lower production costs and new markets. China is a leading example of such a process, which went on par with the growing availability of goods and services that can be traded on the global market.
• Transport efficiency has increased significantly because of innovations and improvements in the modes and infrastructures in capacity and throughput. Ports are particularly important in such a context since they are gateways to international trade through maritime shipping networks. As a result, the transferability of commodities, parts, and finished goods has improved. Decreasing transport costs does more than increase trade; it can also help change the location of economic activities. Yet, transborder transportation issues regarding capacity, efficiency, and security remain to be better addressed.
• Transactional efficiency . An international trade transaction can generate up to 27 documents, of which nine are related to the transfer of possession from the seller to the carrier and the beneficial cargo owner. The financial sector also played a significant role in integrating global trade, namely by providing investment capital and credit for international commercial transactions. For instance, a  letter of credit may be issued based on an export contract. An exporter can thus receive a payment guarantee from a bank until its customer finalizes the transaction upon delivery. This is particularly important since the delivery of international trade transactions can take several weeks due to the long distances involved. Recent efforts towards digitalization are further pushing towards higher levels of transactional efficiency since documentation is in digital format. During a transfer, it is also common that the cargo is insured in the event of damage, theft, or delays, a function supported by insurance companies. Also, global financial systems allow for currency exchanges according to exchange rates that are commonly set by market forces. In contrast, some currencies, such as the  Chinese Yuan , are influenced by policy. Monetary policy can thus be a tool, albeit contentious, used to influence trade.

All these measures are expected to promote the level of economic and social development of the concerned nations since trade facilitation relies on the expansion of human, infrastructure, and institutional capabilities.

4. Global Trade Flows

The nature of what can be considered international trade has changed, particularly with the emergence of global value chains and the trade of intermediary goods they involve. This trend reflects the strategies of multinational corporations positioning their manufacturing assets in order to lower costs and maximize new market opportunities. About 80% of global trade takes place within value chains managed by multinational corporations. International trade has thus grown at a  faster rate than global merchandise production , with the growing complexity of distribution systems supported by supply chain management practices. The structure of global trade flows has shifted, with many developing economies having growing participation in international trade with an increasing share of manufacturing.

Globalization has been accompanied by growing flows of manufactured goods and their growing share of international trade . The trend since the 1950s involved a relative decline in bulk liquids (such as oil) and more dry bulk and general cargo being traded. The share of fuels in international trade tends to fluctuate in accordance with changes in energy demand and prices. Another emerging trade flow concerns the increase in the imports of resources from developing economies, namely energy, commodities, and agricultural products, which is a divergence from their conventional role as exporters of resources. This is indicative of economic diversification as well as increasing standards of living. However, significant fluctuations in the growth rates of international trade are linked with economic cycles of growth and recession, fluctuations in the price of raw materials, as well as disruptive geopolitical and financial events. The Covid-19 pandemic represented the most significant disruptive event since the financial crisis of 2008-09. While trade receded because of lockdowns and lower levels of economic activity, changes in consumption patterns and stimulus packages were associated with a surge in trade in 2021 and 2022.

The geography of international trade remains  dominated by a few large economic blocs , mainly in North America, Europe, and East Asia , commonly called the triad . Alone, the  United States, Germany, and Japan account for about a quarter of all global trade, with this supremacy being seriously challenged by emerging economies. Further, G7 countries account for half of the global trade, a dominance that has endured for over 100 years. A growing share is being accounted for by the developing economies of Asia, with China accounting for the most significant growth in absolute and relative terms. Those geographical and economic changes are also reflected in trans-oceanic trade, with the  Trans-Pacific trade growing faster than the Trans-Atlantic trade .

Neo-mercantilism is reflective of global trade flows as several countries have been actively pursuing  export-oriented economic development policies using infrastructure development, subsidies, and exchange rates as tools. This strategy has been followed by developing economies and is associated with growing physical and capital flow  imbalances in international trade. This is particularly reflected in the American container trade structure, which is highly imbalanced and has acute differences in the composition of imports and exports. A large share of these imbalances resulted from the fiscal policies of exporting countries purchasing American financial instruments, such as bonds. This enabled the US dollar to uphold its value and purchasing power.

Imbalances can also be misleading as products are composed of parts manufactured in several locations, with assembly often taking place in low-cost locations and then exported to major consumption markets. In international trade statistics, a location assumes the full value of finished goods imported elsewhere while it may have only contributed to a small share of the total added value. Electronic devices are illustrative of this issue. Trade imbalances also do not reflect the utility an economy derives from it, such as cheaper consumer goods. Further, the growth of e-commerce has resulted in new actors being involved in international trade, at times indirectly. For instance, ordering a product online may result in an international trade transaction controlled by a single corporation.

Regionalization has been one of the dominant features of global trade as the bulk of trade has a regional connotation, promoted by proximity and the setting of economic blocs such as USMCA and the European Union. The closer economic entities are, the more likely they are to trade due to lower transport costs, fewer potential delays in shipments, common customs procedures, and linguistic and cultural affinities. The most intense trade relations are within Western Europe and North America, with a more recent trend involving trade within Asia, particularly between Japan, China, Korea, and Taiwan, as these economies are getting more integrated.

5. Global Trade at a Threshold?

Since the second half of the 20th century, the growth of international trade has been ongoing and shaped by five salient trends:

• Significant multiplying effects between economic activity and trade . From 1980 to 2020 , exports have grown 8.9 times in current dollars, while GDP increased 7.4 times and the population increased 1.7 times. Since the 2010s, international trade appears to be leveling and subject to more volatility, such as a decline during the COVID-19 pandemic in 2020 and a bounce back in 2021.
• A substantial level of containerization of commercial flows , with container throughput growing in  proportion with global trade. Containerization tends to grow at a rate faster than that of trade and GDP. This has been associated with the setting of intermodal transport chains connecting exporters and importers.
• A concentration of finished goods exports in a limited number of producing countries. For instance, five countries account for 79% of the provision of computer equipment and 75% of the phones. The concentration level is lower for intermediate goods, underlining an active trade of parts within supply chains. For imports, the destinations tend to be much more diversified, reflecting an existing demand irrespective of the origin of the products.
• A higher relative growth of trade in emerging economies , particularly in Pacific Asia, focuses on export-oriented development strategies that have been associated with  imbalances in commercial relations.
• The growing role of multinational corporations as vectors for international trade , particularly in terms of the share of international trade taking place  within corporations and the  high level of concentration of their head offices.

Still, many challenges are impacting future developments in international trade and transportation, mostly in terms of demographics, politics, supply chain, energy, and environmental issues. While the global population and its derived demand will continue to grow and reach around 9 billion by 2050, demographic changes such as the aging of the population, particularly in developed economies, will transform consumption patterns as a growing share of the population shifts from wealth-producing (working and saving) to wealth consuming (selling saved assets). Demographic trends in North America, Europe, and East Asia (e.g. Japan, South Korea, Taiwan) may not place them as drivers of global trade, a function they have assumed in recent decades. The demographic dividend in terms of the peak share of the working-age population that many countries benefited from, particularly China, is receding. This has ramifications on both the demand (consumption structure) and the production side (workforce).

The regulatory environment and the involvement of governments, either directly or indirectly, are subject to increasing contention . Reforms in agricultural trade have not been effectively carried on, implying that many governments (e.g. in the EU) provide high subsidy levels to their agricultural sectors, undermining the competitiveness of foreign agricultural goods. This is undertaken to protect their agriculture, considering the risks associated with dependency on foreign providers and possible price fluctuations. Intellectual property rights remain a contentious issue as well since many goods are duplicated, undermining the brands of major manufacturers and retailers. A whole array of subsidies influence the competitiveness of exports, such as low energy and land costs and tax reductions. The rise of protectionist policies, as exemplified by higher tariffs imposed by the American government on several Chinese goods in 2018 , is underlining a contentious trade environment this is likely to endure.

As maritime and air freight transportation relies on petroleum, international trade remains influenced by fluctuations in energy prices. The paradox has become that periods of high energy prices usually impose a rationalization of international trade and its underlying supply chains. However, periods of low or sharply declining energy prices, which should benefit international transportation, are linked with economic recessions. Environmental issues have also become more salient with the growing tendency of the public sector to regulate components of international transportation that are judged to have negative externalities. International trade enables several countries to mask their energy consumption and pollutant emissions by importing goods produced elsewhere and where environmental externalities are generated. Thus, international trade has permitted a shift in the international division of production, but also a division between the generation of environmental externalities and the consumption of the goods related to these externalities.

Technological changes are impacting the nature of manufacturing systems through robotization and automation . The ongoing fourth industrial revolution is changing input costs, particularly labor. Since a good share of international trade results from the convenience of comparative advantages, automation and robotization can undermine the standard advantages of lower labor costs and make manufacturing more productive at other locations, such as those closer to major markets. Further, since many developing economies remain complex places to undertake business as state and national firms are privileged, losing labor cost advantages could undermine future development prospects. This is likely to strongly influence the nature and volume of international trade, which could level and even regress. If this is the case, absolute advantages, such as resources, would have a greater influence on trade than before the 1970s.

Related Topics

• 7.1 – Transborder and Crossborder Transportation
• 5.4 – Maritime Transportation
• 7.3 – Freight Transportation and Value Chains
• 1.5 – Transportation and Commercial Geography
• 5.6 – Intermodal Transportation and Containerization
• B.8 – Petroleum: A Transportation Resource
• 9.3 – Transport Safety and Security
• B.19 – Transportation and Pandemics

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Globalization: Definition, Benefits, Effects, Examples – What is Globalization?

• Publié le 21 January 2019
• Mis à jour le 25 March 2024

Globalization – what is it? What is the definition of globalization? Benefits and negative effects? What are the top examples of globalization? What famous quotes have been said about globalization?

What is Globalization? All Definitions of Globalization

A simple globalization definition.

Globalization means the speedup of movements and exchanges (of human beings, goods, and services, capital, technologies or cultural practices) all over the planet. One of the effects of globalization is that it promotes and increases interactions between different regions and populations around the globe.

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An Official Definition of Globalization by the World Health Organization (WHO)

According to WHO , globalization can be defined as ” the increased interconnectedness and interdependence of peoples and countries. It is generally understood to include two inter-related elements: the opening of international borders to increasingly fast flows of goods, services, finance, people and ideas; and the changes in institutions and policies at national and international levels that facilitate or promote such flows.”

What Is Globalization in the Economy?

According to the Committee for Development Policy (a subsidiary body of the United Nations), from an economic point of view, globalization can be defined as: “(…) the increasing interdependence of world economies as a result of the growing scale of cross-border trade of commodities and services, the flow of international capital and the wide and rapid spread of technologies. It reflects the continuing expansion and mutual integration of market frontiers (…) and the rapid growing significance of information in all types of productive activities and marketization are the two major driving forces for economic globalization.”

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What Is Globalization in Geography?

In geography, globalization is defined as the set of processes (economic, social, cultural, technological, institutional) that contribute to the relationship between societies and individuals around the world. It is a progressive process by which exchanges and flows between different parts of the world are intensified.

Globalization and the G20: What is the G20?

The G20 is a global bloc composed by the governments and central bank governors from 19 countries and the European Union (EU). Established in 1999, the G20 gathers the most important industrialized and developing economies to discuss international economic and financial stability. Together, the nations of the G20 account for around 80% of global economic output, nearly 75 percent of all global trade, and about two-thirds of the world’s population.

G20 leaders get together in an annual summit to discuss and coordinate pressing global issues of mutual interest. Though economics and trade are usually the centerpieces of each summit’s agenda, issues like climate change, migration policies, terrorism, the future of work, or global wealth are recurring focuses too. Since the G20 leaders represent the “ political backbone of the global financial architecture that secures open markets, orderly capital flows, and a safety net for countries in difficulty”, it is often thanks to bilateral meetings during summits that major international agreements are achieved and that globalization is able to move forward.

The joint action of G20 leaders has unquestionably been useful to save the global financial system in the 2008/2009 crisis, thanks to trade barriers removal and the implementation of huge financial reforms. Nonetheless, the G20 was been struggling to be successful at coordinating monetary and fiscal policies and unable to root out tax evasion and corruption, among other downsides of globalization. As a result of this and other failures from the G20 in coordinating globalization, popular, nationalist movements across the world have been defending countries should pursue their interests alone or form fruitful coalitions.

How Do We Make Globalization More Just?

The ability of countries to rise above narrow self-interest has brought unprecedented economic wealth and plenty of applicable scientific progress. However, for different reasons, not everyone has been benefiting the same from globalization and technological change: wealth is unfairly distributed and economic growth came at huge environmental costs. How can countries rise above narrow self-interest and act together or designing fairer societies and a healthier planet? How do we make globalization more just?

According to Christine Lagarde , former President of the International Monetary Fund, “ debates about trade and access to foreign goods are as old as society itself ” and history tells us that closing borders or protectionism policies are not the way to go, as many countries doing it have failed.

Lagarde defends we should pursue globalization policies that extend the benefits of openness and integration while alleviating their side effects. How to make globalization more just is a very complex question that involves redesigning economic systems. But how? That’s the question.

Globalization is deeply connected with economic systems and markets, which, on their turn, impact and are impacted by social issues, cultural factors that are hard to overcome, regional specificities, timings of action and collaborative networks. All of this requires, on one hand, global consensus and cooperation, and on the other, country-specific solutions, apart from a good definition of the adjective “just”.

When Did Globalization Begin? The History of Globalization

For some people, this global phenomenon is inherent to human nature. Because of this, some say globalization begun about 60,000 years ago, at the beginning of human history. Throughout time, human societies’ exchanging trade has been growing. Since the old times, different civilizations have developed commercial trade routes and experienced cultural exchanges. And as well, the migratory phenomenon has also been contributing to these populational exchanges. Especially nowadays, since traveling became quicker, more comfortable, and more affordable.

This phenomenon has continued throughout history, notably through military conquests and exploration expeditions. But it wasn’t until technological advances in transportation and communication that globalization speeded up. It was particularly after the second half of the 20th century that world trades accelerated in such a dimension and speed that the term “globalization” started to be commonly used.

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Examples of Globalization (Concept Map)

Because of trade developments and financial exchanges, we often think of globalization as an economic and financial phenomenon. Nonetheless, it includes a much wider field than just flowing of goods, services or capital. Often referred to as the globalization concept map, s ome examples of globalization are:

• Economic globalization : is the development of trade systems within transnational actors such as corporations or NGOs;
• Financial globalization : can be linked with the rise of a global financial system with international financial exchanges and monetary exchanges. Stock markets, for instance, are a great example of the financially connected global world since when one stock market has a decline, it affects other markets negatively as well as the economy as a whole.
• Cultural globalization : refers to the interpenetration of cultures which, as a consequence, means nations adopt principles, beliefs, and costumes of other nations, losing their unique culture to a unique, globalized supra-culture;
• Political globalization : the development and growing influence of international organizations such as the UN or WHO means governmental action takes place at an international level. There are other bodies operating a global level such as NGOs like Doctors without borders  or Oxfam ;
• Sociological globalization : information moves almost in real-time, together with the interconnection and interdependence of events and their consequences. People move all the time too, mixing and integrating different societies;
• Technological globalization: the phenomenon by which millions of people are interconnected thanks to the power of the digital world via platforms such as Facebook, Instagram, Skype or Youtube.
• Geographic globalization: is the new organization and hierarchy of different regions of the world that is constantly changing. Moreover, with transportation and flying made so easy and affordable, apart from a few countries with demanding visas, it is possible to travel the world without barely any restrictions;
• Ecological globalization: accounts for the idea of considering planet Earth as a single global entity – a common good all societies should protect since the weather affects everyone and we are all protected by the same atmosphere. To this regard, it is often said that the poorest countries that have been polluting the least will suffer the most from climate change .

The Benefits of Globalization

Globalization has benefits that cover many different areas. It reciprocally developed economies all over the world and increased cultural exchanges. It also allowed financial exchanges between companies, changing the paradigm of work. Many people are nowadays citizens of the world. The origin of goods became secondary and geographic distance is no longer a barrier for many services to happen. Let’s dig deeper.

The Engine of Globalization – An Economic Example

The most visible impacts of globalization are definitely the ones affecting the economic world. Globalization has led to a sharp increase in trade and economic exchanges, but also to a multiplication of financial exchanges.

In the 1970s world economies opened up and the development of free trade policies accelerated the globalization phenomenon. Between 1950 and 2010, world exports increased 33-fold. This significantly contributed to increasing the interactions between different regions of the world.

This acceleration of economic exchanges has led to strong global economic growth. It fostered as well a rapid global industrial development that allowed the rapid development of many of the technologies and commodities we have available nowadays.

Knowledge became easily shared and international cooperation among the brightest minds speeded things up. According to some analysts, globalization has also contributed to improving global economic conditions, creating much economic wealth (thas was, nevertheless, unequally distributed – more information ahead).

Globalization Benefits – A Financial Example

At the same time, finance also became globalized. From the 1980s, driven by neo-liberal policies, the world of finance gradually opened. Many states, particularly the US under Ronald Reagan and the UK under Margaret Thatcher introduced the famous “3D Policy”: Disintermediation, Decommissioning, Deregulation.

The idea was to simplify finance regulations, eliminate mediators and break down the barriers between the world’s financial centers. And the goal was to make it easier to exchange capital between the world’s financial players. This financial globalization has contributed to the rise of a global financial market in which contracts and capital exchanges have multiplied.

Globalization – A Cultural Example

Together with economic and financial globalization, there has obviously also been cultural globalization. Indeed, the multiplication of economic and financial exchanges has been followed by an increase in human exchanges such as migration, expatriation or traveling. These human exchanges have contributed to the development of cultural exchanges. This means that different customs and habits shared among local communities have been shared among communities that (used to) have different procedures and even different beliefs.

Good examples of cultural globalization are, for instance, the trading of commodities such as coffee or avocados. Coffee is said to be originally from Ethiopia and consumed in the Arabid region. Nonetheless, due to commercial trades after the 11th century, it is nowadays known as a globally consumed commodity. Avocados , for instance, grown mostly under the tropical temperatures of Mexico, the Dominican Republic or Peru. They started by being produced in small quantities to supply the local populations but today guacamole or avocado toasts are common in meals all over the world.

At the same time, books, movies, and music are now instantaneously available all around the world thanks to the development of the digital world and the power of the internet. These are perhaps the greatest contributors to the speed at which cultural exchanges and globalization are happening. There are also other examples of globalization regarding traditions like Black Friday in the US , the Brazilian Carnival or the Indian Holi Festival. They all were originally created following their countries’ local traditions and beliefs but as the world got to know them, they are now common traditions in other countries too.

Why Is Globalization Bad? The Negative Effects of Globalization

Globalization is a complex phenomenon. As such, it has a considerable influence on several areas of contemporary societies. Let’s take a look at some of the main negative effects globalization has had so far.

The Negative Effects of Globalization on Cultural Loss

Apart from all the benefits globalization has had on allowing cultural exchanges it also homogenized the world’s cultures. That’s why specific cultural characteristics from some countries are disappearing. From languages to traditions or even specific industries. That’s why according to UNESCO , the mix between the benefits of globalization and the protection of local culture’s uniqueness requires a careful approach.

The Economic Negative Effects of Globalization

Despite its benefits, the economic growth driven by globalization has not been done without awakening criticism. The consequences of globalization are far from homogeneous: income inequalities, disproportional wealth and trades that benefit parties differently. In the end, one of the criticisms is that some actors (countries, companies, individuals) benefit more from the phenomena of globalization, while others are sometimes perceived as the “losers” of globalization. As a matter of fact, a recent report from Oxfam says that 82% of the world’s generated wealth goes to 1% of the population.

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The Negative Effects of Globalization on the Environment

At the same time, global economic growth and industrial productivity are both the driving force and the major consequences of globalization. They also have big environmental consequences as they contribute to the depletion of natural resources, deforestation and the destruction of ecosystems and loss of biodiversity . The worldwide distribution of goods is also creating a big garbage problem, especially on what concerns plastic pollution .

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Globalization, Sustainable Development, and CSR

Globalization affects all sectors of activity to a greater or lesser extent. By doing so, its gap with issues that have to do with  sustainable development  and  corporate social responsibility  is short.

By promoting large-scale industrial production and the globalized circulation of goods, globalization is sometimes opposed to concepts such as resource savings, energy savings or the limitation of greenhouse gases . As a result, critics of globalization often argue that it contributes to accelerating climate change and that it does not respect the principles of ecology. At the same time, big companies that don’t give local jobs and choose instead to use the manpower of countries with low wages (to have lower costs) or pay taxes in countries with more favorable regulations is also opposed to the criteria of a CSR approach. Moreover, the ideologies of economic growth and the constant pursuit of productivity that come along with globalization, also make it difficult to design a sustainable economy based on  resilience .

On the other hand, globalization is also needed for the transitioning to a more sustainable world, since only a global synergy would really be able to allow a real ecological transition. Issues such as global warming indeed require a coordinated response from all global players: fight against CO2 emissions, reduction of waste, a transition to renewable energies . The same goes for ocean or air pollution, or ocean acidification, problems that can’t be solved without global action. The dissemination of green ideas also depends on the ability of committed actors to make them heard globally.

• What Are The Benefits Of Having A Network Of CSR Ambassadors?
• 5 Tips For Organizations To Develop Their CSR Strategy In 2020
• Top 10 Companies With The Best Corporate (CSR) Reputation In 2020

The Road From Globalization to Regionalization

Regionalization can also be analyzed from a corporate perspective. For instance, businesses such as McDonald’s or Starbucks don’t sell exactly the same products everywhere. In some specific stores, they consider people’s regional habits. That’s why the McChicken isn’t sold in India, whereas in Portugal there’s a steak sandwich menu like the ones you can get in a typical Portuguese restaurant.

Politically speaking, when left-wing parties are in power they tend to focus on their country’s people, goods and services. Exchanges with the outside world aren’t seen as very valuable and importations are often left aside.

• Related: Why Is It Important To Support Local And Small Businesses?

Globalization Quotes by World Influencers

Many world leaders, decision-makers and influential people have spoken about globalization. Some stand out its positive benefits and others focus deeper on its negative effects. Find below some of the most interesting quotes on this issue.

Politic Globalization Quotes

Globalization quote by the former U.S President Bill Clinton ??

No generation has had the opportunity, as we now have, to build a global economy that leaves no-one behind. It is a wonderful opportunity, but also a profound responsibility.

Globalization quote by Barack Obama , former U.S. president ??

Globalization is a fact, because of technology, because of an integrated global supply chain, because of changes in transportation. And we’re not going to be able to build a wall around that.

Globalization quote by Dominique Strauss-Kahn, former International Monetary Fund Managing Director ??

“We can’t speak day after day about globalization without at the same time having in mind that…we need multilateral solutions.”

Globalization quote by Stephen Harper , former Prime Minister of Canada ??

“We have to remember we’re in a global economy. The purpose of fiscal stimulus is not simply to sustain activity in our national economies but to help the global economy as well, and that’s why it’s so critical that measures in those packages avoid anything that smacks of protectionism.”

Globalization quote by Julia Gillard , Prime Minister of Australia ??

“My guiding principle is that prosperity can be shared. We can create wealth together. The global economy is not a zero-sum game.”

Other Globalization Quotes

Globalization quote by the spiritual leader Dalai Lama ??

“I find that because of modern technological evolution and our global economy, and as a result of the great increase in population, our world has greatly changed: it has become much smaller. However, our perceptions have not evolved at the same pace; we continue to cling to old national demarcations and the old feelings of ‘us’ and ‘them’.”

The famous German sociologist Ulrich Beck also spoke of globalization ??

“Globalization is not only something that will concern and threaten us in the future, but something that is taking place in the present and to which we must first open our eyes.”

Globalization quote by Bill Gates, owner and former CEO of Microsoft ??

“The fact is that as living standards have risen around the world, world trade has been the mechanism allowing poor countries to increasingly take care of really basic needs, things like vaccination.”

Globalization quote by John Lennon, member of the music band The Beatles ??

Imagine there’s no countries. It isn’t hard to do. Nothing to kill or die for. And no religion, too. Imagine all the people. Living life in peace. You, you may say I’m a dreamer. But I’m not the only one. I hope someday you will join us. And the world will be as one

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The State of Globalization in 2022

• Steven A. Altman
• Caroline R. Bastian

Its collapse has been vastly overstated, according to an analysis of international flows of trade, capital, information, and people.

As companies contemplate adjustments to their global strategies, it is important to recognize how much continuity there still is even in a period of wrenching change. The idea of a world where economic efficiency alone drives patterns of international flows was always a myth. Globalization has always been an uneven process, with cross-country differences and international conflicts significantly dampening international flows. That’s a big part of why — even before the present crisis in Ukraine — only about 20% of global economic output ended up in a different country from where it was produced. As the landscape shifts, global strategies must be updated, but managers should avoid the costly overreactions that tend to follow major shocks to globalization.

Russia’s invasion of Ukraine has led to a new round of predictions that the end of globalization is nigh , much like we saw at the beginning of the Covid-19 pandemic . However, global cross-border flows have rebounded strongly since the early part of the pandemic. In our view, the war will likely reduce many types of international business activity and cause some shifts in their geography, but it will not lead to a collapse of international flows.

• Steven A. Altman is a senior research scholar, adjunct assistant professor, and director of the DHL Initiative on Globalization at the NYU Stern Center for the Future of Management .
• CB Caroline R. Bastian is a research scholar at the DHL Initiative on Globalization.

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ENCYCLOPEDIC ENTRY

Globalization.

Globalization is a term used to describe the increasing connectedness and interdependence of world cultures and economies.

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Globalization is a term used to describe how trade and technology have made the world into a more connected and interdependent place. Globalization also captures in its scope the economic and social changes that have come about as a result. It may be pictured as the threads of an immense spider web formed over millennia, with the number and reach of these threads increasing over time. People, money, material goods, ideas, and even disease and devastation have traveled these silken strands, and have done so in greater numbers and with greater speed than ever in the present age. When did globalization begin? The Silk Road, an ancient network of trade routes across China, Central Asia, and the Mediterranean used between 50 B.C.E. and 250 C.E., is perhaps the most well-known early example of exchanging ideas, products, and customs. As with future globalizing booms, new technologies played a key role in the Silk Road trade. Advances in metallurgy led to the creation of coins; advances in transportation led to the building of roads connecting the major empires of the day; and increased agricultural production meant more food could be trafficked between locales. Along with Chinese silk, Roman glass, and Arabian spices, ideas such as Buddhist beliefs and the secrets of paper-making also spread via these tendrils of trade. Unquestionably, these types of exchanges were accelerated in the Age of Exploration, when European explorers seeking new sea routes to the spices and silks of Asia bumped into the Americas instead. Again, technology played an important role in the maritime trade routes that flourished between old and newly discovered continents. New ship designs and the creation of the magnetic compass were key to the explorers’ successes. Trade and idea exchange now extended to a previously unconnected part of the world, where ships carrying plants, animals, and Spanish silver between the Old World and the New also carried Christian missionaries. The web of globalization continued to spin out through the Age of Revolution, when ideas about liberty , equality , and fraternity spread like fire from America to France to Latin America and beyond. It rode the waves of industrialization , colonization , and war through the eighteenth, nineteenth, and twentieth centuries, powered by the invention of factories, railways, steamboats, cars, and planes. With the Information Age, globalization went into overdrive. Advances in computer and communications technology launched a new global era and redefined what it meant to be “connected.” Modern communications satellites meant the 1964 Summer Olympics in Tokyo could be watched in the United States for the first time. The World Wide Web and the Internet allowed someone in Germany to read about a breaking news story in Bolivia in real time. Someone wishing to travel from Boston, Massachusetts, to London, England, could do so in hours rather than the week or more it would have taken a hundred years ago. This digital revolution massively impacted economies across the world as well: they became more information-based and more interdependent. In the modern era, economic success or failure at one focal point of the global web can be felt in every major world economy. The benefits and disadvantages of globalization are the subject of ongoing debate. The downside to globalization can be seen in the increased risk for the transmission of diseases like ebola or severe acute respiratory syndrome (SARS), or in the kind of environmental harm that scientist Paul R. Furumo has studied in microcosm in palm oil plantations in the tropics. Globalization has of course led to great good, too. Richer nations now can—and do—come to the aid of poorer nations in crisis. Increasing diversity in many countries has meant more opportunity to learn about and celebrate other cultures. The sense that there is a global village, a worldwide “us,” has emerged.

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Globalization and India’s international trade: does distance still matter?

• Published: 27 February 2020
• Volume 86 , pages 1927–1941, ( 2021 )

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• Purva Yadav 1  

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This paper attempts to capture the missing ‘distance’ puzzle in the globalization process driven by trade flows. It is widely recognized that the growing global economic integration process play a major role in the spatial restructuring of many countries at varying geographical scales. The paper illustrates a model of international trade flows that builds upon existing research on the geographies of global trade. Empirical results of the current study indicate that the basic and augmented gravity model provides a useful framework for understanding international trade. The evidence of map pattern in residuals across temporal scale is noted. The results further indicate the importance of distance in the Indian context. An identification of the patterns and determinants of India’s international trade with 87 countries suggests that potentially important differences in regional demands and country specific factors may impact the trade interaction over the years.

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Interregional Trade: Models and Analyses

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Acknowledgements

I am thankful to Professor Hariharan Ramachandran for his fruitful suggestions. I also thank anonymous referees for their useful comments.

This research work is supported by University with potential for Excellence (UPE-II).

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Globalization and International Trade: Benefits and Challenges

Globalization and international trade have transformed the way nations interact, conduct business, and exchange goods and services. The interconnectedness of economies offers both opportunities and challenges for countries worldwide. This essay delves into the benefits of globalization and international trade, examining the advantages it brings to economies and societies, while also exploring the challenges it presents.

Expanded Market Access:

Globalization and international trade open up new markets, allowing businesses to reach a broader customer base and expand their operations.

Economic Growth and Development:

International trade contributes to economic growth and development by fostering specialization, efficiency, and resource allocation.

Access to Resources and Inputs:

Globalization allows countries to access resources and inputs that may not be locally available, promoting economic diversification.

Innovation and Technological Advancements:

Globalization facilitates the transfer of knowledge and technology between nations, driving innovation and technological advancements.

Increased Foreign Direct Investment:

Globalization attracts foreign direct investment, bringing in capital, expertise, and job opportunities to host countries.

Cultural Exchange and Diversity:

Globalization promotes cultural exchange and understanding, encouraging diversity and enriching societies.

Global Supply Chains and Resilience:

International trade enables countries to participate in global supply chains, enhancing resilience and reducing dependency on a single market or source.

Global Labor Market:

Globalization creates opportunities for skilled workers to seek employment worldwide, fostering a global labor market.

Challenges to Domestic Industries:

Globalization can pose challenges to domestic industries facing competition from international firms.

Income Inequality and Labor Standards:

Globalization may exacerbate income inequality and lead to concerns about labor standards in certain industries.

Conclusion:

Globalization and international trade have become defining features of the modern global economy. The benefits of expanded market access, economic growth, and access to resources are evident in countries that have embraced globalization. Increased cultural exchange and technological advancements enrich societies, while global supply chains enhance resilience. However, globalization also poses challenges, such as competition for domestic industries, income inequality, and labor standards. To fully harness the advantages of globalization, policymakers must address these challenges and develop strategies that ensure equitable distribution of benefits. By embracing globalization responsibly and implementing inclusive policies, nations can capitalize on the opportunities it offers while mitigating its adverse effects, ultimately fostering sustainable growth and prosperity on a global scale.

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Call for Papers | Journal of International Marketing: Marketing’s Role in the Management of Fast-Evolving Global Supply Chains

Globalization and digitalization have reshaped global supply chain operations (Alicke et al. 2023). In particular, geopolitical disruptions such as the China–U.S. trade war, Brexit, and Middle East tensions have triggered the reconfiguration of global supply chains for many global companies (Bednarski et al. 2023; Henrich et al. 2022). The Russia–Ukraine war has further accelerated the decoupling between the U.S. and China as well as between the West and Russia. In this rapidly changing and uncertain environment, Apple, for example, has considered reshoring some of its manufacturing back to the United States. Other global companies are also considering a “China + 1” or “China + 2” strategy for their contract manufacturing operations. Such strategies allow international marketing managers to keep some of their manufacturing in China while establishing new production locations, often with the same suppliers, in countries such as Vietnam, India, or Mexico, where political risks and labor costs are more manageable (Vertinsky et al. 2023). Other external shocks and natural disasters such as the COVID-19 pandemic and earthquakes have disrupted firms’ supply chain operations around the world (Panwar, Pinkse, and De Marchi 2022). For example, demand for in-person restaurant dining has decreased, whereas demand for food delivery and home-based consumption has greatly increased (Jeong et al. 2023), forcing multinationals like KFC and McDonalds to modify their operations in host markets. Under such market changes, firms need to explore new ways of organizing their global supply chains with respect to factors like product diversity and cooperation with more partners in the supply chains and ecosystems around the world (Davis et al. 2023; Henrich et al. 2022). These challenges highlight the critical need for international marketing managers to improve planning and forecasting for their global supply chains to be more agile and resilient.

Furthermore, shareholders and stakeholders have been demanding greater accountability from companies, pressing international marketing managers to take responsibility for the environmental, social, and governance (ESG) impacts of their global supply chain and manufacturing activities and to ensure that they’re doing business in an ethical, sustainable, and fair fashion (Henrich et al. 2022). While marketing’s approach to this new expectation varies by country, the market now expects the same standards to be enforced throughout a company’s global supply chain. Accordingly, the stakeholders of global brands, who often hold strong expectations regarding appropriate ESG-related behaviors, have begun scrutinizing not only the firms selling the branded products worldwide but also their entire global supply chains (Mateska et al. 2023).

In the meantime, the emergence of advanced technologies such as AI and Industry 4.0 bring about great opportunities for international marketing managers to coordinate and configure their global supply chains automatically (Alicke et al. 2023; Ejaz and Hegedűs 2023; Lee et al. 2023). For example, Unilever uses an AI application and service to find alternative supply sources on short notice. Koch Industries, one of the largest privately held conglomerates in the U.S., is leveraging an AI tool to optimize its supplier base. Industry 4.0 can also help international marketing managers enhance their resilience to cope with global supply chain disruptions (Tan 2023). Further, cloud computing and blockchain technologies also help integrate a firm’s supply chain partners; enhance the transparency, efficiency, and timeliness of global supply chain activities; and enable international marketing managers to cope with communication barriers in the market. However, there is a potential downside: When there are unanticipated natural disasters or geopolitical tensions (Henrich et al. 2022), minimizing potential interruptions in such optimized, digitalized, and complex global supply networks may pose major challenges. Thus, managing global supply chains in the era of digitalization emerges as a critical and challenging task for international marketing managers.

Despite these emerging challenges and opportunities for international marketing managers, academic research on these areas is limited. Most academic work on supply chain management has focused on domestic context and overlooks how different formal and informal institutions would shape firms’ global supply chain strategies (Usui, Kotabe, and Murray 2017). Specifically, little research attention has been paid to how global supply chains can be managed to improve the flow of supplies from the perspective of international marketing, how firms can cope with emerging managerial challenges, or how international marketing managers can take advantage of new opportunities in their global supply chains. To fill this gap, there is an urgent need to develop new theories, modify existing theories, and determine how firms can manage their global supply chains in the face of emerging trends of globalization and digitalization.  

Suggested Topics for Submissions

We encourage research on any aspect of global supply chain management from the perspective of international marketing at all levels of analysis, such as the individual employee or entrepreneur, firms, supply chains, platforms as well as ecosystems. Different types of firms (e.g., multinationals, regionals, local importers/exporters, suppliers, key account customers, born-globals, virtual vs. physical firms) and different institutional (e.g., formal, informal, government, trading blocs) and regional settings are encouraged. We call for more interdisciplinary and foundational research to expand the knowledge base of global supply chains in international marketing. We invite all types of research—qualitative, behavioral, and empirical—and encourage researchers to identify multiple sources of data and use multiple methods for this special issue. Conceptual papers and critical reviews are also welcome.

Suggested topics include, but are not restricted to:

• How can international marketing managers effectively control the governance mechanism and, thus, manage relationships with different global supply chain participants and members in the ecosystem across different countries to mitigate emerging geopolitical disruptions?
• How can international marketing managers leverage emerging technologies like AI, blockchain, machine learning, virtual reality, and big data for global supply chain management? What is the role of those emerging technologies for international marketing managers in coping with the challenges in the global supply chain activities?
• What is the role of digitalization (e.g., EDI, internet-based platforms, virtual meetings, social networks) in global supply chains in seeking efficiency, timeliness, as well as agility for international marketing managers?
• What is the role of blockchain and decentralized technologies in global supply chains, and how do they affect interorganizational relationships and efficiency in global supply chains?
• What marketing strategies, resources, and capabilities are needed for different types of firms to manage global supply chains given recent technological, geopolitical and other changes?
• What is the role of different institutional contexts in global supply chain management strategies?
• Can informal institutions such as culture and norms in different countries affect global supply chain management strategies?
• How do ESG initiatives and requirements shape firms’ global supply chain management? How can firms develop strategies and resources to meet ESG requirements for their global supply chains?
• How do suppliers or contract manufacturers manage their global account relationships across different countries in the uncertain global market environment?
• How does marketing–supply chain integration affect firms’ global supply chain management given recent changes? Has the role of marketing changed in global supply chain management—and if so, how?
• What are the impacts and implications of advanced technology and technology-based platforms on a firm’s globalization of its supply chain activities?
• What is the impact of digital technologies in offshoring, onshoring, and reshoring of a firm’s manufacturing activities?
• What are the global, regional, and local market implications of reshoring of a firm’s manufacturing activities for international marketing managers and for managing global supply chains?

Submission Process

All manuscripts will be reviewed as a cohort for this special issue of the Journal of International Marketing . All submissions will go through the Journal of International Marketing’s double-anonymized review and follow standard norms and processes. Submissions must be made via the journal’s ScholarOne site , with author guidelines available here . For any queries, feel free to reach out to the special issue editors.

Manuscripts must be submitted between December 1, 2024 and March 1, 2025.

Guest editors.

Daekwan Kim ([email protected]) is Spencer-Feheley MBA Professor in the College of Business at Florida State University and a Visiting Eminent Scholar at Kyung Hee University in Seoul, Korea. His research interests include the impact of IT and Industry 4.0 on interfirm relationships and relational performance, marketing/international marketing strategies, and international buyer–seller relationships. His research has appeared in the Journal of International Business Studies, Journal of Academy of Marketing Science, Decision Sciences Journal, Industrial Marketing Management, Journal of Business Research, Journal of International Marketing, Journal of World Business, Management International Review, International Marketing Review, International Business Review, and others. He is currently a Senior Editor of International Business Review and an Associate Editor of Decision Sciences Journal, and serving on the editorial boards of Journal of International Business Studies, Industrial Marketing Management, Journal of Business Research, Journal of International Marketing, and Thunderbird International Business Review. 

Ruey-Jer “Bryan” Jean ([email protected]) is Distinguished Professor of International Business at the Department of International Business, National Taiwan University, Taipei. He received his PhD from University of Manchester, UK. His research focuses on interorganizational relationship management and international new ventures in digital and data-rich environments, with a focus on emerging markets. He has published widely in peer-reviewed academic journals, including the Journal of International Business Studies, Journal of Management Studies, Journal of World Business, Management International Review, International Business Review, International Marketing Review, Journal of Business Research, Journal of International Management, and Journal of International Marketing. He is currently an Associate Editor of International Marketing Review and serving on the editorial boards of Journal of Business Research, International Business Review, and Asia Pacific Journal of Management.

S. Tamer Cavusgil ([email protected]) is Regents’ Professor and Fuller E. Callaway Professorial Chair and Executive Director, CIBER, Robinson College of Business, Georgia State University. A trustee of Sabanci University in Istanbul, Türkiye. Tamer authored more than several dozen books and some 200 refereed journal articles. He mentored over 40 doctoral students at Michigan State and Georgia State who have become accomplished educators around the world. Tamer holds an honorary doctorate from The University of Hasselt and the University of Southern Denmark, in addition to being named as an Honorary Professor by Atilim University in Ankara, Türkiye. He is an elected Fellow of the Academy of International Business. Tamer holds a Bachelor of Science degree from the Middle East Technical University in Ankara, Türkiye. He earned his MBA and PhD from the University of Wisconsin.

Ayşegül Özsomer ([email protected]) Ayşegül Özsomer is Professor of Marketing at Koç University, Istanbul, Türkiye. She specializes in global marketing, branding, emerging markets and the role of marketing in tough economic times. She has published in top scholarly journals including the Journal of Marketing, Journal of Marketing Research, International Journal of Research in Marketing, and Journal of International Marketing. Ayşegül received several research awards including the 2011 Gerald Hills Best Paper Award for ten-year impact on entrepreneurship research, the 2013 Cavusgil Award for her paper investigating the interplay between global and local brands, and the 2023 Cavusgil Award for her paper on marketing agility. She has held visiting scholar positions at the University of Michigan, Ann Arbor, the Anderson Graduate School of Management, UCLA, and Harvard University. Her co-authored book, The New Emerging Market Multinationals: Four Strategies for Disrupting Markets and the Competition (McGraw Hill) was selected the best strategy book by Business+Strategy.

Alicke, Knut, Tacy Foster, Katharina Hauck, and Vera Trautwein (2023), “Tech and Regionalization Bolster Supply Chains, but Complacency Looms,” McKinsey (November 3), https://www.mckinsey.com/capabilities/operations/our-insights/tech-and-regionalization-bolster-supply-chains-but-complacency-looms .

Bednarski, Lukasz, Samuel Roscoe, Constantin Blome, and Martin C. Schleper (2023), “Geopolitical Disruptions in Global Supply Chains: A State-of-the-Art Literature Review,” Production Planning & Control , https://doi.org/10.1080/09537287.2023.2286283 .

Davis, Cameron, Ben Safran, Rachel Schaff, and Lauren Yayboke (2023), “Building Innovation Ecosystems: Accelerating Tech Hub Growth,” McKinsey (February 28), https://www.mckinsey.com/industries/public-sector/our-insights/building-innovation-ecosystems-accelerating-tech-hub-growth .

Ejaz, Muhammad R. and Dániel Hegedűs (2023), “Designing a Conceptual Framework for Industry 4.0 Technologies to Enable Circular Economy Ecosystem,” Managing Global Transitions , 21 (2), 121–48.

Henrich, Jan, Jason Li, Carolina Mazuera, and Fernando Perez (2022), “Future-Proofing the Supply Chain,” McKinsey (June 14), https://www.mckinsey.com/capabilities/operations/our-insights/future-proofing-the-supply-chain .

Jeong, Insik, Ruey-Jer Jean, Daekwan Kim, and Saeed Samiee (2023), “Managing Disruptive External Forces in International Marketing,” International Marketing Review , 40 (5), 936–56.

Lee, Jeoung Y., Daekwan Kim, Byungchul Choi, and Alfredo Jiménez (2023), “Early Evidence on How Industry 4.0 Reshapes MNEs’ Global Value Chains: The Role of Value Creation Versus Value Capturing by Headquarters and Foreign Subsidiaries,” Journal of International Business Studies , 54 (4), 599–630.

Mateska, Ivana, Christian Busse, Andrew P. Kach, and Stephan M. Wagner (2023), “Sustainability-Related Transgressions in Global Supply Chains: When Do Legitimacy Spillovers Hurt Buying Firms the Most?” Journal of Supply Chain Management , 59 (4), 42–78.

Panwar, Rajat, Jonatan Pinkse, and Valentina De Marchi (2022), “The Future of Global Supply Chains in a Post-COVID-19 World,” California Management Review , 64 (2), 5–23.

Tan, Hooi (2023), “It’s Time to Join the Fourth Industrial Revolution,” SME Media (June 22), https://www.advancedmanufacturing.org/smart-manufacturing/its-time-to-join-the-fourth-industrial-revolution/article_035bc430-059d-11ef-b638-d772541cc117.html .

Usui, Tetsuya, Masaaki Kotabe, and Janet Y. Murray (2017), “A Dynamic Process of Building Global Supply Chain Competence by New Ventures: The Case of Uniqlo,” Journal of International Marketing , 25 (3), 1–20.

Vertinsky, Ilan, Yingqiu Kuang, Dongsheng Zhou, and Victor Cui (2023), “The Political Economy and Dynamics of Bifurcated World Governance and the Decoupling of Value Chains: An Alternative Perspective,” Journal of International Business Studies , 54 (7), 1351–77.

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