Global Trade Patterns and Relationships

The following points provide an overview of global trade patterns

• Just ten nations, including China, the USA, Germany and Japan, account for more than half of all global trade
• The value of world trade and global GDP has risen by around 2 per cent annually since 1945 with the exception of 2008-09 when the Global Financial Crisis (GFC) led to a brief fall in activity
• More than half of all trade originating in developed countries takes place with other developed countries. This is because of the large numbers of affluent consumers and markets found in the world’s wealthiest countries.
• The importance of China’s rise as both a major exporter and importer of goods cannot be overstated. Since the early 1980s, China has emerged as the dominant influence on world trade. Indeed, a slowdown in the rate of Chinese growth since 2010 has been responsible for a “cooling off” of the global economy as a whole. In particular, falling Chinese demand for imports of natural resources and oil has been financially harmful for many African exporters selling raw materials to China.

In addition to patterns of trade, other important global economic relationships can be mapped by geographers and these include:

• Patterns of outsourcing: Outsourcing is obtaining key products from alternative, cheaper locations - often abroad - than original home-sources. In the past, out-sourcing took place to wherever the least cost supplier was located. Sainsbury’s sources charcoal for barbeques all the way from South Africa, for instance. Recently, more TNCs are opting strategically to use suppliers closer to home due to the risks and costs of supply chain disruption incurred by natural hazards (the Japanese tsunami of 2011) and conflict in North Africa and the Middle East. This new trend is called “near-sourcing”.
• Patterns of foreign direct investment:  Sometimes, facilities are built wherever labour and land costs are lowest, irrespective of distance from markets. At other times neighbour countries are preferred due to shared membership of regional trade blocs and agreements. For instance, US company Fender makes guitars in neighbouring Mexico. Not only is labour cheaper, but the NAFTA agreement means there are no import taxes to pay when the guitars are brought back to the USA.
• Trends in mergers and acquisitions:  an acquisition is when a TNC launches a takeover of a company in another country. In 2010, the UK’s Cadbury was subjected to a hostile takeover by US food giant Kraft. The UK has few restrictions on foreign takeovers. In contrast, the Committee on Foreign Investment in the USA closely scrutinises inbound foreign takeovers. In mergers, two firms in different countries join forces - usually voluntarily -  to create a single corporate entity. Royal Dutch Shell is an Anglo-Dutch merger with two headquarters: in the UK and the Netherlands.

Overall, world trade is dominated by developed countries and several large emerging economies (EEs). Two important groups of EEs to be aware of are:

• The BRIC group:  The four large economies of Brazil, Russia, India and China are key players in world trade. China is the world’s number one exporter of goods (valued at US$2 trillion in 2013). All have an extensive land area, are mineral-rich and have a large potential home-market in terms of population numbers.
• The MINT group:  The four fast-growing economies of Mexico, Indonesia, Nigeria and Turkey are all important manufacturing hubs. Nigeria is additionally a major exporter of oil and also trades globally in low-budget films (the “Nollywood” film industry).