The growth and patterns of international trade

Abstract

Over the last 40 years, there has been an unprecedented growth in trade amongst countries, and the growth in trade shows no sign of slowing down. The increases in trade have put tremendous pressure on the maritime and port industries, and these industries have responded with innovations, investment, and greater productivity. International trade and maritime trade are synonyms, and an understanding of the determinants of international trade is central to understanding maritime trade. In this paper, we provide a review of the international trade literature with a focus on the determinants of trade and the evolution of trade modeling. We then present a broad overview of the extent and growth of trade in the context of primary determinants. The basic results are: (1) Trade is growing at a phenomenal rate; (2) Trade is dominated by relatively few countries who tend to remain dominant; (3) While trade of all products is growing, there are large differences in the growth rates, but yet, there is stability in the relative sizes of product markets; and (4) Over the last 40 years, trade has changed from major flows between the US and Europe to major flows between Asia and the US.

Notes

^1. These figures are drawn from the United Nation’s COMTRADE files described in Section 3.

^2. The model was developed by both Eli Heckscher and Bertil Ohlin, but formally published in English by Ohlin (1935).

^3. Further, inspection of the data at various commodity levels, point to omissions for product classifications at the three-digit level or higher, with egregious omissions for the five-digit levels. Most of our analysis is, therefore, based on broad commodity aggregates.

^4. Membership in OECD remained stable from the period 1973 to 1994. From the period 1994 to 2010, several countries joined, but the bulk of trade was dominated by the 1973 members.

^5. We took the rank in a year t and the rank in another year t + k and calculated the correlations for each k. For small k, the rank correlations are exceedingly high, e.g., in excess of 0.94 for k < 10, and are in excess of 0.9 for both importers and exporters throughout the 38 years of consideration (1973–2011).

^6. In 1973, Belgium and Luxemburg reported consolidated numbers.

^7. As just one of many examples, railroads in the US were partially deregulated in 1980. The US is the leading market in the world. The railroad industry is a primary mode which provides transportation of marine traffic inland. Railroad rates are now about one-half of the level at the time of partial deregulation.