Challenges of Global Trade
Challenges of global trade is created as a result of people entering international markets. With a little attention to the tools we use during the day, we realize that we are a consumer for some foreign goods. Many of the devices we use are either made in foreign countries or their components are made and imported in another country. In addition, we have read and heard many times in the news about global trade and the need for domestic empowerment. All these things are under the title of international trade. While countries need this type of trade, they are also worried about needing too much of it.
From Commodity-to-Commodity Trade to Global Trade
One of the challenges of world trade and the main challenges in the discussion of commercial policies is the issue of different productions in a specific country. What should be produced and to what extent. Early human societies had to produce all the products they needed by themselves. But in this regard, they faced limited resources; For this reason, they faced the vacuum of part of their needs.
Simultaneously with the progress of human societies, they came to the understanding and belief that it is possible to buy and provide needed goods that they cannot produce in another way. This led to the formation of commodity-to-commodity trade. In this way, they sell their manufactured goods to others and in return they receive goods that they could not produce. This process was the starting point of trade and in the next step, international trade.
Today, with the remarkable advances in technology and communication, we are facing many changes in the field of international trade. International trade is considered as a catalyst in developing countries. Developing countries can export their manufactured goods to other countries using the capabilities of this type of business. At the same time, the possibility of job creation and earning domestically is also provided for these countries.
Imports are Cheaper than Productions
However, some countries import these goods despite their ability to produce some products inside. The United States of America is one of these cases. The United States of America imports goods such as coffee, bananas, and cocoa, despite having a lot of manpower and being able to start mass production. America can even completely remove international trade from its economic cycle at this moment without affecting the welfare of its citizens.
But what is the reason for importing goods while being able to produce them? The answer is simple; The cost of importing goods is much lower compared to their production. For example, human rights in China are lower than in America. As a result, the cost of producing a certain product in China is much lower and more economical than in America. This issue creates commercial relations between the two countries.
Global Trade Challenges
1. Wide Currency Fluctuations
It is no secret that exchange rates are exposed to extreme fluctuations. The deep impact of these fluctuations and instability is felt in the field of international trade and harms global trade. These fluctuations cause economic disturbances and slow down the movement in the direction of specialization of industries.
2. China’s International Competition
If we take a deeper look at the goods we use, we will notice the name of China as its producer. China is rapidly dominating a major part of the world markets. This issue has caused many politicians and economists to worry.
In addition, human resources in China work with much lower wages, and this issue has become a great competitive advantage in the international market. China is currently one of the main attractors of capital and technology from advanced countries. Relying on this technology and funds, it can produce the most products for global markets at the lowest cost. This issue has become a new challenge for countries to remain in the field of global competition.
3. Financial Crisis
Financial crises are more visible in countries that have a market-based economy. These conditions have threatened the stability of the international monetary system. Despite the progress made in the structure of market-based economies, these structures still need changes.
4. Poverty in Developing Countries
Contrary to the high economic growth of some developing countries such as China and India, the situation is different in many developing countries. We see these countries with extreme poverty, stagnation, inflation, foreign debt and high class differences. These cases also disrupt the global trade process. If the correct solution is not adopted for international trade in such countries, it is possible that trade becomes a threat from an opportunity.
5. The Challenge of Globalization
Globalization is an inevitable phenomenon. In line with the process of globalization, we are facing the integration of world economies. A part of this integration occurs through commodity, commercial, monetary flows, labor migration, etc. In the course of globalization, we are facing the convergence of individual tastes all over the world. This also increases the exchange of goods and services between countries. Manufacturing companies want to hire their workforce from cheaper regions, get the parts they need from all over the world at a lower cost, and transfer their capital and technology to more efficient countries for more efficiency.
Up To Sum
Despite the numerous challenges we face in the path of globalization, this process is inevitable and certain. Therefore, it will be necessary and helpful to know the challenges ahead in better performance in global markets.