The Pattern of World Trade

Since every international transaction has both a buyer and a seller, one country's imports must be another country's exports. To get an idea of how much trade takes place, we can count the total value of export by all countries or the total value of import.

They must be exactly the same. And to count both imports and exports would be to count every transaction twice.

Table shows the value of world exports for selected years and, as a benchmark, the level of world trade relative to GNP in the world's largest single economy, the United States.

Two facts stand out. First, in real terms world trade has expanded very rapidly since 1950, at an average annual rate of 8 per cent. International trade has been playing an increasingly important part in national economies. Between 1960 and 1989, UK exports as a fraction of GNP rose from 20 per cent to nearly 30 per cent. Details for selected countries are shown in Table. By 1988, world exports were about 18 per cent of world GNP.

Second, the Great Depression of the 1930s and the Second World War virtually destroyed international trade. It was not until the 1960s that world trade again reached its level of 1928.

As trade has grown, both in absolute terms and relative to the size of national economies, the interdependence of national economies has increased. Like many of the countries shown in Table, Britain is now a very open economy. Events in other countries affect our daily lives much more than they did 20 years ago. We now look at the facts about who trades with whom.

World Trade Patterns

In Table we show the pattern of trade among three major groups of countries. The industrial or developed countries include Western Europe, North America, Japan, Australia, and New Zealand, the rich countries with the largest share of world trade and world income. The Soviet bloc comprises Russia and the countries of Eastern Europe. The remaining countries are the less developed countries (LDCs) - ranging from the very poor, such as China and India, to the nearly rich, such as Brazil and Mexico.