The benefits of trade and globalisation

Trade increases wealth. And according to one set of stats, in the United States alone, GDP is one trillion dollars higher today than it would have been had it not been for advances in trade since World War 2. That’s a staggering finding. The data comes courtesy of the US Peterson Institute. It found that deeper engagement since World War two, caused by trade agreements, and improvements in transportation and communication technologies has increased US GDP per capita by $10,000.

See Why Globalization Pays.

According to a report from McKinsey, global flows of goods, foreign direct investment and international data flows have increased global GDP by 10 per cent. In 2014 alone, the world’s total output was $7.8 trillion higher, as a result.

It supports wealth creation for more than one reason.
For one thing, international trade enables countries to specialise in what they do best. According to figures published by the White House, workers in US export intensive industries earn 10 per cent more money than their equivalents in non-export intensive industries. Take for example, an average industry in the US. Export growth in the 1990s and 2000s alone was responsible for wages rising by $1,300 a year for the average middle-class worker.

For another thing, trade reduces the price of goods paid by consumers. Returning to the White House research, compared to a world with no trade, median-income consumers gain an estimated 29 percent of their purchasing power from trade.”

Then take productivity.

Recent years have seen disappointing growth in productivity. In the UK, productivity is woeful.

So is that down to globalisation?

The White House says that actually “over the past twenty years, average . . . . increases in exports for each industry translated into eight per cent higher productivity.”

A series of three articles:
Part one: Globalisation, is there really such a reason to be so discontented?.
Part two: The benefits of trade and globalisation
Part three: Globalisation and Brexit, global leaders shift emphasis


For more See:

The economic benefits of US trade.
Why Globalization Pays.

When Globalization Goes Digital.

And Digital globalization: The new era of global flows.

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