Throughout the past century, global trade has increased proportionally, and trade between countries today is a thriving, complex economic system. Today, trade is not just about the exchange of final products – it also involves the exchange of intermediate inputs. World trade has increased at a phenomenal rate, with more than fifty percent of global output being traded internationally. The world’s exports, for example, are 40 times greater than they were in 1913.
But global trade is not without its risks. There are often cultural complexities that are hard to anticipate. For example, it is common for countries to dump cheap products into the world market, and exploitation of natural resources may take place. In addition, trade between countries can discourage small and medium-sized local producers and sellers. Underdeveloped nations, in particular, rely heavily on exports to meet domestic demands. This can be an expensive proposition.
With demand for commodities and services growing globally, supply chains are reshaping to meet these needs. Once heavily dominated by advanced economies, emerging markets are now gaining significant share of world consumption. By 2025, emerging markets are expected to consume two-thirds of the world’s manufactured goods. This includes cars, building materials, machinery, and more. In 2030, developing countries are expected to represent half of global demand, and their integration into global flows will only deepen.
Even with this progress, there are countries that are still far behind. The poorest countries are particularly vulnerable, with their share of world trade dropping significantly. To survive, the poorest nations must lower their trade barriers. These nations include about 75 developing and transition economies, which include almost all of the world’s least developed nations. Many of these countries rely on exports and production of traditional commodities. The reasons for this disadvantage are deep-seated structural problems, weak institutions, and lack of protection at home.