Every day, a network of ships, trucks and planes move
massive quantities of goods around the world.
Your car might come from South Korea,
and your T-shirt from Bangladesh.
All countries export, sell products and services
abroad and import buy goods and services from foreign trading partners.
These goods are manufactured items or agricultural commodities. Services,
a dynamic and growing part of trade, refer to all intangible goods
such as advertising and telecommunication.
But the trade network is more complex than sellers and buyers.
The system of worldwide trade is an intricate web
in which lengthy supply chains allow products to be sourced,
assembled, packaged and sold in different parts of the world.
The materials for your phone or shoes or the tuna fish you had for lunch
might have been produced in one country, processed in another country,
assembled in a third country and packaged somewhere else.
All before getting to your local store,
how does this make sense?
Why can't countries just make their own phones, shoes or tuna
fish and provide more jobs in business domestically?
Before the 19th century, most European countries tried to do just
that prioritizing self-sufficiency in a system called mercantilism.
Mercantilism aimed to maximize exports, minimize imports,
and increase the country's supply of gold.
This system led to strict tariffs, or taxes on imports, as a way
to not only discourage bringing in goods from abroad, but profit off it.
Mercantilism created barriers to international trade.
Countries aim to produce as much as possible on their own,
including things they weren't able to make efficiently.
In the late 18th century, so-called classical economists refuted
these long held beliefs, championing the idea that societies should trade
with one another to be more successful because of comparative advantage.
The idea that when countries focus on making things,
they're comparatively good at an import, the rest everyone benefits.
This is known as specialization, and when countries don't have to spend
time and resources producing textiles or wine, for example,
there's more room for them to innovate and create entirely new products.
These classical economists argued that it was counterproductive
to judge a country's power on how much gold it could amass.
Today, we measure countries in economies on productivity their ability
to utilize their limited resources for maximum value.
This metric is known as Gross Domestic Product, which totals
the sum of all the final goods and services a country produces in a year.
Each country's human, physical, technological
and financial resources determine what that country can produce efficiently
and successfully.
Costa Rica excels at exporting pineapples and coffee, while Germany exports
millions of cars and computers. With the acceptance of these new ideas.
International trade took off.
Measuring GDP instead of just gold helped boost trade and grow economies.
At the same time,
advances in technology and travel made remote markets much more accessible.
Massive container ships, cargo planes and cheap, instantaneous
communication connected the world's producers with millions of new customers.
And after World War Two,
the newly formed United Nations created the General Agreement on Tariffs
and trade, or get this agreement, substantially lowered trade barriers
like tariffs and created rules to dictate how countries should trade freely.
The GATT became
the World Trade Organization in 1995 and tried to eliminate
even more obstacles to keep up with the changing world.
The WTO expanded the definition
of trade to include not just goods but services, and to create rules
governing intellectual property such as copyright or a patent.
The WTO is also an arena for countries to hammer out the rules and regulations
of international trade
and lodge complaints if they believe those rules aren't followed.
According to the principle of comparative advantage,
if one country can't sell a high quality product at a reasonable price point
or new technology, make the business uncompetitive,
It will not succeed.
Its stores or factories might be forced to close and jobs will be lost.
That country must then
adjust its economy around something it can be comparatively good at.
This is the nature of international trade.
However, some countries and industries are accused of skirting
the rules of international trade, and that's where the WTO tries to come in.
For example, in the United States, labor unions argue the WTO doesn't
adequately protect U.S.
wages from being undercut by unfair trade practices in China.
And some developing countries say the WTO rules
don't take into consideration their unique circumstances.
For example, agricultural subsidies provided by wealthy governments
make it hard for sellers from smaller or poorer countries to reasonably export
their crops to those countries.
The WTO has failed to solve these problems.
They are especially hard to address
because changes to the rules require consensus among the WTO's
164 member countries.
Some countries forge bilateral and regional trade agreements
to address their particular needs and trade strategies.
In 1994, the North American Free Trade Agreement,
known as NAFTA, was designed to facilitate more trade
among the United States, Mexico and Canada.
NAFTA provided a blueprint for similar types of agreements
between other countries.
From just 1990 to 2015,
world trade volume increased more than fivefold
from 3.5 trillion to 19 trillion.
International trade has created a tightly interconnected world economy
that's given more people than ever access to cheaper and better goods and services.
It's created millions of jobs and strengthened
international connections leading to global stability.
At the same time, trade can hurt those individuals,
companies and communities where imports make it impossible
for local firms to compete against better or cheaper goods from somewhere else.
Trade will inevitably
create winners and losers, but it is inseparable from modern life.
The challenge, then, for policymakers is to assist those
who have been disadvantaged with support and the training for new jobs
so everyone can continue to benefit from the system that is given more choices
to consumers and more work for producers in every corner of the world.