III. The geography of globalization exchanges

A. The dynamism of international trade as an explanatory factor of the global distribution

International trade now exceeds world production. That is to say that flows, trade is beyond the real production measured by the GDP. In 2011, trade is 2 times higher than world production.

A total of 21,986 billion US$ of world exports in 2011 of which: 17,816 billion US$ of trade in goods and 4,170 billion US$ for services.

Among the goods traded: the share of manufactured products remains very important and is constantly increasing. Conversely, agricultural products are less and less at the heart of world trade.

Only FDI from developed countries is decreasing, so it is the developing countries that are allowing FDI flows to increase at the global level. It is indeed the FDI of developing countries that ensures the continuity of the growth of world trade. Thus they upset the world hierarchy where the countries of the North were dominant.

However, even FDI is highly sectoralized and reveals the fact that it drives world trade according to its distribution. The increase in the share of services in world trade is concomitant with the increase in FDI in services.

B. Regionalization

Regionalization is a response to internationalization.

The North is organized around a multilateral agreement at the global level: GATT in 1947 (General Agreement on Tariffs and Trade).

Regionalization appeared in the 1950s: ECSC in 1951 and EEC in 1957. Multiplication of specific regional exchanges.

The regional liberalization of trade in goods takes two forms:

  • geographical extension
  • Further liberalization of trade within the zone in question.

Global competition is organized around three poles:

  1. Western Europe is the first pole of trade
  2. North America is the second trade hub
  3. Asia is the third trade hub

They are known as the triad and account for 86.9% of world exports.

There is also a continuous development of intra-regional trade between rich countries. Intra-regional trade remains strong in North America, Europe and Asia. Europe has the largest intraregional trade, accounting for 71 percent of the region’s exports in 2011. In Asia, 53% of exports are to countries in the region. In North America, nearly 48% of exports are destined for NAFTA members.

The countries of the South are organizing themselves to compensate for their lack of integration. South-South trade accounts for just over one tenth of the total world trade, but it is growing rapidly. South-South trade can have a decisive influence on the shape of the new trade geography. Regional economic and trade cooperation, including through bilateral and regional trade agreements, is a central mechanism used by a growing number of developing countries to promote reciprocal trade and investment. Some of these arrangements, such as MERCOSUR, have had a significant impact on the expansion of trade in certain sectors among participating countries, as well as between these countries and the rest of the world.

C. Asia’s assertiveness

The Asian miracle has helped to make this region thethird largest trade hub in the world and, since 2008, the most important area for interregional trade. According to the World Bank, this area contributed 40% of the increase in world production in 2012.

  • The Asian dragons: South Korea, Singapore, Hong Kong and Taiwan (1,970s)
  • Asian Tigers: Thailand, Malaysia, Vietnam, Philippines, Indonesia (1,980s)
  • China: annual growth rate of the last 10 years at 20% and growth rate at 10%. It became in 2008 the first world exporter.

This success is explained by industrial innovations, an abundant, specialized and low-cost workforce, increasing trade surpluses, an extroverted development model, high savings and investment rates, and a favorable exchange rate trend.

Summary of the Economics Course on Globalization:

  • I. Globalization: presentation and phases
  • II. Waves of globalization
  • III. The geography of globalization exchanges
  • IV. Multinational firms
  • V. Protectionism

General Knowledge: globalization