The four most important things to know about
the International Trade System (ITS):

    1st: What it is

·  The system of exchange of goods and services between countries

·  2 types of trade: merchandise and service

1.  Merchandise trade

• primary goods (raw materials-foods, fuels, fibers, minerals)

• manufactured goods

2.  Service trade

• requires direct relationship between the buyer and seller

• requires commercial presence in foreign markets

-----------------------------------------------------------------------------------------2nd: A highly interdependent system with GN-GS disparities
 

World Trade:

· 1913-world trade totaled $20 B

· 2007-world trade was estimated to be totaled at ~ $11.4 T---Was an increase of $3.5 T in just 10 years

Increased trade due to:

• Industrial Revolution

• Resource requirement

• Materialism

• Transportation

• Free trade philosophy

Trade has not occurred evenly throughout the world
   ○ EDCs-76% of all trade
   ○ LDCs-24% of all trade (most of this from NICs)
   ○ Merchandise flow (p.3)

Trade in Goods & Services

Primary Goods in 1960	Primary Goods in 1990
1/2 of all trade	1/5 of all trade

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3rd:  A Western-induced, GN-dominated phenomenon 

***Mirrors IMS evolution, with one exception--no IMF equivalent***

• British domination, European colonization

• Post WWI policies of protectionism

• Post WWII:  US becomes economic hegemon for free world

US trade hegemony

• Dominates through General Agreement on Tariffs & Trade (GATT)

• Est. 1947 out of ITO proposal

• US initiated the various GATT Trade Round talks

• Based on Principle of Nondiscrimination through 'normal trade relations'

• GATT rounds:  First 5 rounds, overall tariffs reduced 73%

• Way to promote stability and development

• ITS and GATT required cooperation
      ○ Japan, European Union bloc

• World Trade Organization 1994

• GATT rounds were replaced by ministerial conferences

• US Trade Agreements- USTR Ron Kirk

Result:  GN has a comparative advantage over the GS