In the time preceding the 20th century, the volume of trade was considerably limited, and our everyday existence lacked the abundance of goods we presently encounter from different countries. Nonetheless, with the emergence of the Industrial Revolution, advancements in technology, innovations in transportation, and modifications in trade regulations like Free Trade Agreements (FTAs), there has been a remarkable surge in global trade volume. This significant increase in trade is especially noticeable over recent years due to these various factors converging to create an environment conducive to heightened international commerce.
1. An era of flourishing commerce
The increase in trade volume, as previously indicated, was particularly evident from the latter half of the 20th century to the initial years of the 21st century. Specifically, following the 1990s, global trade volume experienced continuous expansion and this trend persisted even after the occurrence of the 2008 global financial crisis. The significantly heightened trade volume has played a crucial role in bolstering worldwide economic growth, consequently making trade an indispensable component of the global economy. Presented below are five pivotal periods that witnessed this surge in trade.
1) Early 20th Century
Industrialization and Increased Exports The increase in trade volume, as previously indicated, was particularly evident from the latter half of the 20th century to the initial years of the 21st century. Specifically, following the 1990s, global trade volume experienced continuous expansion and this trend persisted even after the occurrence of the 2008 global financial crisis. The significantly heightened trade volume has played a crucial role in bolstering worldwide economic growth, consequently making trade an indispensable component of the global economy. Presented below are five pivotal periods that witnessed this surge in trade.
2) Post World War I
Global Economic Recovery and the Launch of the Age of Free Trade In the 1920s and 1930s after World War I, governments made efforts to increase trade activities for the recovery and growth of war-torn economies. As part of that effort, we began to have various mechanisms to lower trade barriers, along with low tariffs to promote free trade. As a result, trade volume has increased and the global economy has been revitalized.
3) 1950s-1980
Rapid economic growth and the emergence of multinational corporations During the period from the 1950s to the 1970s, multinational corporations experienced significant economic expansion, particularly in certain advanced nations. These enterprises started functioning across boundaries to manufacture goods at reduced costs and distribute them to a larger customer base while fostering stronger international connections. Subsequently, in the 1980s, globalization further intensified due to increased implementation of free trade agreements and open economic policies alongside burgeoning international trade patterns, particularly witnessed in emerging economies like China.
4) Since the 1990s
Advances in Information and Communication Technology Since the 1990s, the surge has been made possible by the advancement of information and communication technology along with globalization. With the spread of the Internet, e-commerce has developed, global platforms have emerged, and it has helped to promote cross-border trade and increase trade volume. The conclusion of global trade agreements and increased mobility facilitated trade between countries, and the development of the Internet and telecommunications technologies accelerated the globalization of businesses. Trade volume during this period showed economic interdependence between countries and global economic development.
5) 21st Century
New Towns and New Economy The 21st century witnessed the emergence of new cities that served as thriving centers for trade and commerce. This transformation also gave rise to innovative economic systems, marked by the proliferation of digital content and online transactions. Moreover, alongside traditional trade between nations and corporations, small-scale businesses conducted directly between individuals became significant contributors to the expanding trade volume in this era.
2. The main reason for the surge in trade volume
The increase in trade volume can be attributed to the interplay of several significant factors. Let us examine some of the primary reasons collectively.
1) Globalization and Trade Liberalization
Countries have adopted various strategies, including reducing tariffs, signing trade agreements, and creating organizations like the World Trade Organization (WTO), to promote international trade. These initiatives seek to accelerate economic revival in nations that experienced significant post-World War downturns. Significantly, the introduction of free trade agreements (FTA) combined with the WTO has considerably diminished tariff obstacles, encouraging greater trading operations and enhancing global market harmonization.
2) Technological innovation and advances in communication technology
Advancements in information and communication technologies have eradicated geographical limitations for nations and businesses, thereby broadening trade opportunities for small enterprises. The progress of electronic commerce, effective means of communication, and transportation infrastructure has significantly enhanced the effectiveness of global transactions encompassing goods and services.
3) Division of production and global supply chain
In order to boost their competitiveness, companies have embraced a worldwide strategy by dispersing production and manufacturing processes across the globe, as well as establishing intricate supply chains. Consequently, there has been a substantial relocation of large-scale production facilities to countries with ample resources and affordable labor, leading to increased trade collaborations among diverse nations.
4) Initiating economic growth and broadening investment opportunities
Governments have implemented various policies to rejuvenate the free market and attract more foreign investment. This has resulted in increased competition between companies across international borders, leading to a boost in production and trade.
5) Economic growth and increased consumption
As the economy advances, there has been a noticeable increase in personal income. This boost in earnings has resulted in higher consumer spending and a greater need for varied products and services. Consequently, trade volume has also witnessed substantial growth, providing consumers with an expanded range of options to choose from.
6) structural changes in the industrial sector
: The industrial sector has experienced significant transformations, resulting in a rise in trade volume. Notably, advancements in technology and improvements in productivity, particularly within the manufacturing sector, have facilitated the creation of diverse products through large-scale production.
The era of exponential expansion in the volume of global trade emerged during the late 20th century and continued into the early 21st century. This remarkable growth was a direct outcome of multiple influential factors, as thoroughly analyzed previously. The combined impact of these factors has transformed trade into a worldwide marketplace, allowing for unrestricted movement of goods and services across national boundaries.