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The changing face of global trade

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ManInTheStreet
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The changing face of global trade

#152501

Postby ManInTheStreet » July 15th, 2018, 4:52 pm

This book's over two years old, but is a stunning read, and for those who read it should stop them posting silly failing US/EU comments I've read on here recently. The US and EU economies *are* growing, you just need to know where to look. Here's a review from The Economist:



TRADE has changed a lot in the last 25 years. Indeed, we are still struggling to understand why trade growth was so rapid before the 2008 crisis, and has been relatively sluggish since. Richard Baldwin's new book "The Great Convergence: Information Technology and the New Globalization" was reviewed in last week's issue (and here are the thoughts of the FT's Martin Wolf). But the book is so important that it is worth looking again at some of its insights.

The first is that we tend to think of competitiveness of individual states (particularly in an era of populist nationalism) - the US is competing against China and Germany. But goods are no longer assembled entirely within the bounds of one factory in one country. Instead, many goods are assembled in "global value chains" in which products are designed in one country, but made from parts built in several countries and assembled in another country.


https://www.economist.com/buttonwoods-n ... obal-trade

odysseus2000
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Re: The changing face of global trade

#152693

Postby odysseus2000 » July 16th, 2018, 3:42 pm

ManInTheStreet
TRADE has changed a lot in the last 25 years. Indeed, we are still struggling to understand why trade growth was so rapid before the 2008 crisis, and has been relatively sluggish since. Richard Baldwin's new book "The Great Convergence: Information Technology and the New Globalization" was reviewed in last week's issue (and here are the thoughts of the FT's Martin Wolf). But the book is so important that it is worth looking again at some of its insights.

The first is that we tend to think of competitiveness of individual states (particularly in an era of populist nationalism) - the US is competing against China and Germany. But goods are no longer assembled entirely within the bounds of one factory in one country. Instead, many goods are assembled in "global value chains" in which products are designed in one country, but made from parts built in several countries and assembled in another country.

https://www.economist.com/buttonwoods-n ... obal-trade


This is a very common comment that one finds in economic publications.

It is cited as though it is some new insight into the way manufacturing works and usually comes up when folk are talking about tariffs.

The issue is that since the Industrial Revolution in the UK which introduced standards and ways to easily measure them there has since then been global trade with numerous stuff made from parts in different countries, this an acceleration of much older trades.

If you want an example of a big trade involving these mechanisms from the pre-industrial revolution period, one can think of the triangular Slave trade where trinkets made in the UK were taken to Africa and used to buy slaves who were then taken to various countries and forced to do work like grow and harvest sugar cane, grow and harvest cotton etc, these were then sold to the developed nations and used for food, feed stocks for the textile industry with product then being sold elsewhere, either as finished goods or components.

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Re: The changing face of global trade

#152715

Postby Dod101 » July 16th, 2018, 5:42 pm

I do not see what the triangular slave trade has to do with the concept of having components made in various different countries and then assembled somewhere else which seems to be what the book is explaining. The idea of so called triangular trade has probably been around as long as trade itself and can be found everywhere. Just as no haulage contractor wants to send a truck of goods from say Glasgow to Bristol and return empty, ditto liners and cargo aircraft. This results in a form of trade exchange but so what?

Time was when a ship (or rather many ships) were built on the Clyde, fashioned from local steel, fitted out by local carpenters and other trades and then exported. Nowadays cars may be assembled in Cowley but where are they actually manufactured, because components are manufactured in many different locations and imported to the UK to be assembled? It is really the same principle as VAT, value is simply being added in each stage of the process, and it is no longer the case of importing the raw materials and manufacturing from scratch. That seems to be the message of the book although I have not read it.

Dod

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Re: The changing face of global trade

#152718

Postby odysseus2000 » July 16th, 2018, 5:52 pm

Dod
I do not see what the triangular slave trade has to do with the concept of having components made in various different countries and then assembled somewhere else which seems to be what the book is explaining. The idea of so called triangular trade has probably been around as long as trade itself and can be found everywhere. Just as no haulage contractor wants to send a truck of goods from say Glasgow to Bristol and return empty, ditto liners and cargo aircraft. This results in a form of trade exchange but so what?

Time was when a ship (or rather many ships) were built on the Clyde, fashioned from local steel, fitted out by local carpenters and other trades and then exported. Nowadays cars may be assembled in Cowley but where are they actually manufactured, because components are manufactured in many different locations and imported to the UK to be assembled? It is really the same principle as VAT, value is simply being added in each stage of the process, and it is no longer the case of importing the raw materials and manufacturing from scratch. That seems to be the message of the book although I have not read it.


Yes, but that is my point, the human species since the stone age has been an import export economy. There is evidence of stones, flints, minerals what ever being mined in one place and then turning up in many, indicating the exact same principle as a modern car.

If you look a little further forward to the bronze age you find centres of excellence making stuff and exporting it all over the known world and that continues to the present time.

I cited the slave trade as this was at its time a huge industry with exactly this kind of make/grow etc in one place and sell somewhere else.

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Re: The changing face of global trade

#153096

Postby ManInTheStreet » July 18th, 2018, 9:40 am

My point in posting the link to the book is that, under the noses of so many people, so many places around the world are growing whilst the EU apparently is not. Not everywhere it is true, but certain key countries are growing, and that is having an effect on the global market. China dominates this discussion, but think of the investments into Eastern Europe. The countries around the South China Sea.

20 years ago this wasn't really considered. But what seems to have happened is a mixture of the Internet and countries realising they have to play by global rules means the game has changed. BIg time. Yes it is only niche areas, but as many of these countries gain skills and knowledge where will we be in another 20 years? And this is the effect of having mobile global capital. It can stick two fingers up at the labour of the west, and go where it thinks it is most efficient. Is that a good thing?

Hans Rosling is another who pointed out what is going on. With the increasing education of women around the world many are having fewer children. I watched The Misadventures of Romesh Ranganathan as he went to Ethiopia. His reaction is what I mean about people's silly views on the world, and how things work. You cannot use your preconceptions of what you think the world is like, because it is very likely not as you think.

Once these new economic regions have enough purchasing power in local hands, as a skilled workforce grows, they will trade with each other and not with the west. That is already happening to some extent, but with lower value goods. People aspire to a bicycle. That improves their economic position and they get richer. Then to a car. 20 or 30 years from now (the blink of an eye) how much further developed will we be?

You see China everywhere in the world, investing often in roads and railways to provide infrastructure to help the hosts' economy. You see India with its techies, whose skills and knowledge are growing as fast as any in the west, but with a lower cost base for companies meaning they get more attractive by the year. The English language is also everywhere (because of the dominance of the US) and is part of the glue.

And within this we have Brexit, and Britain thinking it is oh, so special. If we do leave the EU we'll have a rude awakening.

BTW I've read the book a couple of times and I think it's an excellent read.

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Re: The changing face of global trade

#153263

Postby odysseus2000 » July 19th, 2018, 12:51 am

ManInTheStreet
Once these new economic regions have enough purchasing power in local hands, as a skilled workforce grows, they will trade with each other and not with the west. That is already happening to some extent, but with lower value goods. People aspire to a bicycle. That improves their economic position and they get richer. Then to a car. 20 or 30 years from now (the blink of an eye) how much further developed will we be?

You see China everywhere in the world, investing often in roads and railways to provide infrastructure to help the hosts' economy. You see India with its techies, whose skills and knowledge are growing as fast as any in the west, but with a lower cost base for companies meaning they get more attractive by the year. The English language is also everywhere (because of the dominance of the US) and is part of the glue.

And within this we have Brexit, and Britain thinking it is oh, so special. If we do leave the EU we'll have a rude awakening.


Yes, all this is true, but when folk get prosperous what do they want? They want the best or what they perceive to be the best that they can get and for the moment that means the products of a lot of US corporations: Apple, Tesla, Google, Facebook, Twitter...

The way many US corporations look at these emerging markets is not as a threat but as a source of new consumers. Things may change but for now prosperity often means acquiring western goods.

Many writers like to suggest that the developing world will trade with itself and shut the west out and that might happen if the west has nothing they want, but I don't see it like that at all, much more the opposite. Apple on one of their recent conference call were impressed by the growth in business in India which they see as a potentially huge market.

The problem as I see it is that most of the western goods that folk aspire to are from US corporations. Europe has failed in many respects to develop businesses in this new age which to me is an issue of secular decline.

If the UK does leave Europe then there will be the need to make goods and services that folk in the developing markets will want to trade in with the potential to create secular growth within the UK via the do it or see living standards falter. Of course who knows what will happen but what we have seen of European attempts to grow are not impressive in my humble opinion.

Regards,


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