Relationship Between Trade And World Output Essay

Relationship Between Trade And World Output - Essay Example In the similar vein when countries export their surplus goods to the nations who need them in exchange of money or other goods, it helps them both to boost their production level. Therefore, increase in international trade underscores the growth of world output. Despite the fact that international trade and world output are so very closely related to each other, there has observably been greater increase in international trade than the world output (Motley, 2005). Grimwade (2000, p36) clarifies that, "a major consequence of the fact that trade has grown faster than output has been that economies have become more open and economically more interdependent". As a consequence of such rapid growth in international trade, countries have become more and more reliant on other countries for the fulfilment of their needs for products and services. Hence, international trade is growing at a much faster pace than that of the output. The pattern of international trade simply refers to how countries are involved in trading with each other and how this constitutes a share in the world trade (Motley, 2005). The broad pattern of international trade reflects the share of developed and underdeveloped countries in the world output as well as contribution of each country towards the growth of world trade. This pattern changes with respect to individual countries as the world trade grows, however, in the broader perspective the international trade pattern demonstrates a consistent trend. Grimwade (2000, p20) says that, "over two-thirds of world trade is accounted for by the developed countries, a share that has been broadly stable over the past thirty years". More of the world's trade is carried out between developed countries than the underdeveloped ones due to the reason that these countries tend to produce surplus goods that could be exported to others. It is also a fact that domestic industries of developed countries are stronger than that of the underdeveloped countries, which leads them to adopt free trade policy. This pattern of trade also depends upon a country's policy towards open and restricted trade. As more developed countries are proponents of free trade, the contribution of these countries in the world trade happens to be greater than the underdeveloped countries that tend to be protectionist with regard to trade. Restricted trade policies in the form of various trade barriers and quotas, as well as trade promotion policy, in the form of incentives and grants on particular commodities tend to greatly influence a country's international trade pattern. Consequences Of Ceasing International Trade As a result of increasing international trade, countries are becoming reliant on each other for the provision of necessary goods and services. Hence, the very idea of ceasing international trade activities will seem horrifying to many countries. Grimwade (2000, p25) illuminates that, "the much faster expansion of trade relative to output has also meant that those countries that have shared in the process, have become increasingly interdependent". Countries today, heavily depend upon each other for the fulfilment of their needs by means of foreign trade. Not only the developed countries rely on imports and exports, but the underdeveloped