trade

International Trade:

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US economy is highly developed and technologically advanced which contributes to more than 81% of its output as there are highly dominated companies in the country which effects its technology financial and service sector in the country. The country mainly exports machinery, mineral fuels and vehicles. UK on the other hand is the sixth largest economic growing nation whose GDP has been note to be growing in the duration given. UK major exports includes machinery, chemicals and some crude materials (Varsakelis, 2001).

Other measures that could be used in measuring the level of globalization includes the tariffs trade, foreign assets and liabilities, economic restrictions, migration and synthetic indicators such as the Ease of Doing Business Index, World Governance Index, Global Enabling Trade Report, and the Human Development Index.

Openness being a measure of degree of integration of the domestic economy to the world economy, it shows the ratio of the trade to GDP as GDP shows the measure of total production of a nation during a given duration which is represented by

Openness= (exports+ imports) ÷GDP

Most trade consists of agricultural commodities and the raw materials prior to the World War 1 but currently it’s shifted to the manufactured goods, consumer goods and the producer goods. The current producers and the manufactures are much more exposed to the international competition and this is due to the spread of the multinational corporations (Gundlach, 1997).

The ease of building of production sites and mobilization of resources including labor in affiliated countries coupled with improvement of telecommunication and transportation gave immense power to these companies development and MNCs become increasingly important in world trade scenario (Rodrik, 1999).

The data of the UK and US trade and the GDP per capita shows a correlation coefficient of 0.9933 for US and 0.3765 for UK. This shows that US has become more and more open as the economy develops through the 1985-2005 period. However the data of UK has shown a weaker correlation between the GDP and the per capita.

From the figure, US is more open than the economy of UK. However both their economies shoed a similar trend in their openness during period 1985-2005. Both the economies become more open as time progress. This is shown from the upward slopping of index of the openness curve above. The openness of USA is more than that of UK and the overall upward trend with the highest and the lowest openness trend as shown in the figures above (Rodrik, 1999).

In general it’s evident that smaller countries have larger index of openness as their trade does not produce wide range of products on their own. Hence the openness measures the importance of the international trade in the national’s economy although this does not give any info on the barriers of trade (Gundlach, 1997).

Several factors may contribute to the driving the openness in this countries, this may include some of the factors that has both positive and negative impacts on the imports and the exports in the country. Technology being an influential factor may contribute to the development of a country to raise its relative openness towards trade. With both UK and US being both developed countries, their impact on technology has been notice and this has been as influential on this countries as they have the required resources that they can employ to maximize their output (Kaushal, et al. 2015).

Another driving force to trade is the potential trade independence as sharing borders with most of the countries gives a country a more advantageous trading center as they would have a higher trading openness as they have easier options on importing and exporting the from the country as this would help them in utilizing the resources and sell them at an optimal price, this would have a positive impact on the tariffs and the trade barriers, while having the purchasing power to import the products. This would create the regulations of what can be imported and exported within the country, so as to impact those traders (Gundlach, 1997).

References

Gundlach, E. (1997). Openness and economic growth in developing countries. Review of World Economics, 133(3), 479-496.

Kaushal, L. A., & Pathak, N. (2015). The causal relationship among economic growth, financial development and trade openness in US economy. International Journal of Economic Perspectives, 9(2), 5-22.

Rodrik, D. (1999). The new global economy and developing countries: making openness work.

Varsakelis, N. C. (2001). The impact of patent protection, economy openness and national culture on R&D investment: a cross-country empirical investigation. Research policy, 30(7), 1059-1068.

US index of oppenness

Column1 1985.0 1986.0 1987.0 1988.0 1989.0 1990.0 1992.0 1993.0 1994.0 1995.0 1996.0 1997.0 1998.0 1999.0 2000.0 2001.0 2002.0 2003.0 2004.0 2005.0 US 1985.0 1986.0 1987.0 1988.0 1989.0 1990.0 1992.0 1993.0 1994.0 1995.0 1996.0 1997.0 1998.0 1999.0 2000.0 2001.0 2002.0 2003.0 2004.0 2005.0 60.0 60.0 62.0 64.0 68.0 71.0 73.0 70.0 75.0 75.0 92.0 105.0 106.0 98.0 110.0 105.0 100.0 106.0 104.0 109.0

Time

index of oppennesss

UK index of oppenness

UK 1985.0 1986.0 1987.0 1988.0 1989.0 1990.0 1992.0 1993.0 1994.0 1995.0 1996.0 1997.0 1998.0 1999.0 2000.0 2001.0 2002.0 2003.0 2004.0 2005.0 50.0 52.0 53.0 54.0 57.0 54.0 57.0 59.0 65.0 60.0 65.0 70.0 82.0 75.0 85.0 86.0 92.0 94.0 95.0 97.0 Column1 1985.0 1986.0 1987.0 1988.0 1989.0 1990.0 1992.0 1993.0 1994.0 1995.0 1996.0 1997.0 1998.0 1999.0 2000.0 2001.0 2002.0 2003.0 2004.0 2005.0

Time

index of oppennesss