International Trade
...nited States as a result of loans made during World War I. The United States refused to forgive or even reduce the debts choosing instead to extend more loans to pay off existing ones. When the American economy began to weaken, European nations were no longer able to borrow more money to make the loan payments and with the United State’s high tariffs in place it became difficult for them to sell their goods in the American market. Without loans or revenue from exports to repay the loans they began to default on the loans. By 1931 the entire world was reeling from the worst depression of all time (Wikipedia, 2004). Undeniably, a pattern of trade between countries does exist. About sixty percent of total world merchandise trade is between the world’s high income economies. High income economies trading with middle to low income economies accounts for about 34 percent and low income economies only shows about six percent of world merchandise trade (Wild, et al, 2003). Patterns of trade also exist among different types of goods or services. Examples of this are evident on the World Trade Organization’s website. According to a World Trade Organization press release on June 11, 2004, “International trade patterns have change in two significant areas over the past two decades (WTO, 2004). The World Trade Organization states that, “growth in the services trade is no longer clearly outstripping growth in goods, while agricultural trade has shifted away from commodities toward processed products (WTO, 2004). Industrial products, financial services, telecommunications, and insurance are among the fastest growing sectors while transport, agricultural goods, and mining products are among the slowest growing sectors (WTO, 2004). Another pattern in international trade that exists refers to what services or goods countries generally import or export. Countries usually export what they either have absolute advantage or comparative advantage in producing. Absolute advantage is the ability of a nation to produce a good more efficiently than any other nation and comparative advantage is the inability of a nation to produce a good more efficiently than other nations but an ability to produce that good more efficiently than it does any other good (Wild, et al, 2003). An example of this is Columbia would export coffee, Japan exports cars, United States imports bananas, and China imports beef. If the nations of the world were to suddenly cut off all trade with one another I bel...