Challenge as well as an Opportunity Introduction The history of global trade has been a long one. International community has seen rapid growth of global trade especially in recent decades. As I later find out in this course, my preconception about what global trade was is not an accurate and complete one. And I will compare it to the academic definition of global trade and know better about where the difference is from.
In addition, when I analyzed the facts and data I collected during the reflective study, I realized that global trade In he real world diverges away from what it is in the academic discussion and study. Furthermore, since I am personally especially interested in the roles played by developing nations, I will conduct an analysis using the SOOT method to Illustrate the strengths, weaknesses, opportunities and threats facing developing nations In the global trade business.
As a result, by comparing my previous knowledge and current analysis during the course, I come to an unexpected and optimistic conclusion that developing nations can harness the opportunities in the global trade business and achieve satisfying economic growth, taking China as an example. For other struggling developing economies, this conclusion provides some insights based on which I will make my policy recommendations. Finally I will explain the enlightenment’s drawn from this course and learning process. Additionally, I mentioned the potential limitation of this reflective writing owing to the lack of quantitative analysis.
SOOT analysis conducted In the research Is mainly In the form of qualitative analysis. Thus its exaction should still be doubted. However, the value of enlightenment and policy recommendation is dramatic. What global trade is and what I think it is Global trade (Business Dictionary 201 3) refers to the vast exchange and flow of goods as well as all kinds of services, capital and human resource all around the globe to achieve trade purpose, utilizing all possible means of payments, logistics and communication.
Transnational corporations are the primary practitioners of Global trade. This definition contracts to my previous knowledge significantly. Previously I thought global trade is just about goods transaction. Alternatively, it has been acknowledged that the flow of services and capital are also vital in global trade. With he facilitating function of highly and increasingly developed communication and transportation technologies, the flow of service and capital become much easier and seemingly more vital than other aspects.
By comparison, I find out that global trade Is a much more extensive concept than I previously thought. Global trade: under ideal circumstance and the real world John Maynard Keynes reflected (Globalization and the wealth of nations 2008) that global trade should result in the possible circumstance where, for Instance, citizens in London are accessible to goods and services of every corner of the planet earth at OFF whatsoever. Such will greatly facilitate the participation in and the enjoyment of the economic development for London citizens.
And all of them believe this to be normal and a permanent thing. When compare this description of the ideal global trade to the real world, we find both good times and bad times of the global trade development, which means things are far from perfection. For example, the year of 2008 alone has witnessed global goods and services export and import reaches Electrical devices and natural resource trade took the largest share, which is 29. 2% (with 15% coming from manufactured goods ND 13% from natural resource).
Among all the participants of global trade business, American took the largest share of the cake reaching nearly 14% of all international exports. (Economy watch 2010) Unfortunately, the 2008 economic crisis has given a huge blow to international trade as world economy is slumping. For example, thanks to the slumping economy, growing production cost and its rising currency exchange rate, Japanese auto manufacturers witnessed, in 2008 and 2009, a strong decrease of auto exports.
In 2009, the total production of Japanese cars Jumped too 3 decades low to a little ore than 7,900,000, which meant a 31. 5% decrease comparing to the year of 2008. Faced with the previous data I collected, I decided that global trade must have been suffering a huge setback in these several years since the 2008 crisis. Surprisingly, the case is not that simple. I realized that some developing nations’ economy and global trade witnessed an incredible inverse growth under the current economic situation. For example, in 2009, instead of Japan, China became the new no. Auto maker in global markets with a production of 13,800,000. It occurs to me that developing actions will have big roles to play in the global trade business. Jeffrey Hays 2009) Developing nations: a SOOT analysis of their global trade business Developing nations are economically backward. It is hard for them to equip themselves with the conditions required for the competition in global trade. For example, inadequate capital and unskilled work force make them incapable of producing the goods and services for the global market.
It is unlikely that developing nations could somehow prevail considering all these weaknesses. These are my preconceptions for the reality. Alternatively, after a thorough case study of the Chinese manufacturing market and its global trade, it occurs to me that even with all these shortcomings developing nations are not doomed in global trade. The global trade activities from developing countries actually surpass the trade flow of the developed countries mainly located in the northern hemisphere. Hanson, 2012) In order to attain a clear understanding of the real situation, I realize that a SOOT analysis is proper to illustrate the strengths, weaknesses, opportunities and threats opinion that developing nations must be on the absolute weak end of global trade in heir competition with developed nations, I find that there are opportunities for developing nations as well. The SOOT approach will also provide a vivid explanation of the fact that China actually manages to succeed in global trade business and maintain a relatively high trade surplus, though not without any prices.
Figure 1 SOOT analysis of globe trade for developing nations Strengths: * comparative advantages such as cheap and rich labor force, abundant natural resources reserves * Advantage of backwardness can potentially shorten the time taken for development and capital accumulation * the establishment of market economy and better macroeconomic regulation Weaknesses: * insufficient capital support, backward management level, efficiency and competitiveness pose entry barriers for developing nations * under-developed manufacturing industry determines that developing nations are supposed to mainly engage in labor-intensive industries like textile industry with low additional value * technology weaknesses, unskilled labor force, inadequate education and research investment and an incomplete market economy system Opportunities: * free trade areas and other protocols and organizations, such as transnational reparations at unparalleled sizes and organizations like WTFO, endeavor to facilitate global trade and build an increasingly enlarging global market * geographic integration of production, distribution and consumption with global production networks enabled developing nations to participate more in certain aspects of the production process * unexploited markets and the potential for high profit * development of e-commerce and other technologies * declining communication and transportation costs Threats: * a worldwide economic slump significantly influences goods and services export rising currency rate, trade tariff, high transport costs increase the cost to conduct global trade and decrease potential profit * rising global protectionism and other barriers pose invisible difficulties for developing countries * more fierce competition from other economic bodies * environmental burden due to excessive economic growth * Interdependence between developing nations and developing ones increases the potential risk of a large-scale economic crisis in the future as Friedman suggests that we are living in a flat world. Thus additional attention should be cast to their operations within the country. Provides a qualitative analysis for measuring the strengths, weaknesses, opportunities and threats facing emerging economies when it comes to global trade. However, after careful consideration and reflection, I decide that the limitations of the analysis should be noted since it can not illustrate the exact effect of a specific conduct. Instead, it offers an general understanding of the strengths, weaknesses, opportunities and threats in global trade facing developing nations.
Further analysis and research should be conducted utilizing data and statistics to illustrate more recessively. Conclusion, enlightenment and policy recommendations With all the strengths, weaknesses, opportunities and threats displayed and analyzed above, I reach a much more complete recognition of the dynamic change taking place in the past years. Being able to clarify these issues is not only vital for earning good grades for the course itself, but also quite crucial in my knowledge of the world I am living in. Furthermore, enlightenment can be drawn about how I should keep critical about my own preconceptions and contrast it with the research outcome. In the end, monumental policy recommendation can also be made based on the results.
As a conclusion, this essay offers the definition of global trade and illustrates the current global trade business. With data collection, I find out that my preconception about global trade business incorrect and incomplete. And developed nations are supposed to be the main players in global trade market. Until the 2008 economic crisis changed the layout of global trade business. Developing nations turn out to be new but refreshing players of global trade. Thanks to the strong growth of some merging economies, global trade has not suffered very severe setback. If properly managed, emerging economies are able to utilize the strengths and opportunities of the previous SOOT analysis results, simultaneously avoiding the weaknesses and potential threats.
The achievement of a steady and continuous growth for developing nations in global trade can be reality. Surprisingly, my knowledge and ideas about the global trade has changed so much that I find myself agreeing theories I previously thought impossible and infeasible. I come to the conclusion that critical thinking should be applied and careful reification and research process should be the necessary action if I do not presume to take some theory for granted and make similar mistakes again in the future. As with developing nations, certain actions can be helpful for them to succeed in the global trade business. The establishment of market economy and better macroeconomic regulation should be guaranteed.
The government can reach satisfying economic performance by ensuring it is running under the basic principles of the market economics theories, such as free competition. Labor extensive industries are the strengths of developing nations in global trade. But the overemphasis of it will limit the continuing development in the long run, thus is harmful to the overall economy. Multinational corporations serve well during global trade for economic growth purposes. Appropriate harness of their advantages can be domestic market can be otherwise harmful in case economic crisis occurs. Therefore additional attention should be cast to their operations within the countries, which contradicted with my preconception that the more multinational corporations, the greater the economic growth.