By Jean Narcisse Djaha
Why are some nations performing better than others in the global economy? They make trade and international trade powerful weapons for national and global competitiveness.
”Trade is power, but International Trade is Superpower” Jean Narcisse Djaha
Introduction
Since the beginning of time, international trade has always been at the heart of several successful economic developments. Trade allowed nations to enter the global economy and become a force for national economic growth. Trade can be a powerful force for economic leadership, growth, development, and productivity. Trade can play a tremendous role in harnessing competition and competitiveness of a nation, an organization, and a society. Although this may change in the upcoming years, as I am writing these lines, trade is still what holds countries strong on the global stage.
Competitiveness is a country’s ability to sustain and increase its share of international markets and at the same time to improve its people’s quality of life. One can view trade as central to advancing a nation at all levels. It appears that nations that are involved in global trade tend to grow faster, innovate, improve productivity, and provide higher income and more opportunities to their people. Open trade also benefits lower-income households by offering consumers more affordable goods and services. Integrating with the world economy through trade and global value chains helps drive economic growth and reduce poverty—locally and globally.
International trade and national competitiveness
Trade improves the national standard of living and brings national economic growth. Participation in international trade affects the economic growth of a given country only temporarily (short-term enrichment effect) in the long run, sustainable progress of GDP is possible only in the presence of sustained technological progress. International trade increases the national standard of living: improves living conditions by helping create more jobs, and finances education (primary, secondary, and higher education).
Joining the global trading system has proven countless times a great tool for nations to promote economic growth, development, and poverty reduction. Over the years, the growth of world trade has averaged 6 percent per year, twice as fast as world output. But trade has been an engine of growth for much longer. Since 1947, when the General Agreement on Tariffs and Trade (GATT) was created, the world trading system has benefited from eight rounds of multilateral trade liberalization, as well as from unilateral and regional liberalization. A perfect case study is the exceptional trade growth of India in 2022. India’s merchandise export in January 2022 was USD 34.06 billion, an increase of 23.69% over USD 27.54 billion in January 2021 and an increase of 31.75% over USD 25.85 billion in January 2020.
Trade and Global Competitiveness
Trade improves the state of competitiveness. The historical record is clear: no country has developed successfully in modern times without harnessing economic openness for its national development.
Trade has long been one of the most important forces for economic growth, building communities, and accelerating sustainable development. There is a raw correlation between global trade and growth. Over the last couple of centuries, the world economy has experienced sustained positive economic growth, and over the same period, this process of economic growth has been accompanied by even faster growth in global trade.
Let us consider China. To date, China maintains 17 Free Trade Agreements (FTAs) with its trade and investment partners and is negotiating or implementing an additional eight FTAs. China’s FTA partners are ASEAN, Singapore, Pakistan, New Zealand, Chile, Peru, Costa Rica, Iceland, Switzerland, Maldives, Mauritius, Georgia, South Korea, Australia, Cambodia, Hong Kong, and Macao. In addition, in November 2020, China and 14 other countries signed the Regional Comprehensive Economic Partnership. China announced the ratification of the agreement in early 2021. These free trade agreements have benefited China in several ways. Kishore Mahbubani, Founding Dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore said since the US left the Trans-Pacific Partnership Agreement(‘’TPP’’), China’s trade volume with ASEAN nations has gone from 40 billion to more than 800 billion US dollars.
China continues to increase trade volumes and revenues via the Trans-Pacific Partnership free trade agreement. The TPP economies made up some 40 percent of global gross domestic product (GDP), both in terms of the number of countries and total trade flows.
Final Thoughts
Trade and multilateral trade cooperation have a key role to play in building a more resilient world by helping to bring down inflation and reignite growth, minimize the risk of economic fragmentation, and tackle climate change. Participation in international trade affects the economic growth of a given country only temporarily (short-term enrichment effect) in the long run, Sustainable progress of GDP is possible only in the presence of sustained technological progress.
Author The Author
Jean Narcisse Djaha, Ph.D., is the Founding President and Chairman of the African Council on Foreign Relations. He is guided by Romans 8:30” And those he predestined, he also called; those he called, he also justified; those he justified, he also glorified”.
