Answer to Question #45309 in Economics of Enterprise for Walter Mabuyawa

Question

Opportunities of international trade and how it benefits households and firms?

Answer 1

There are four developing opportunities for the current world economy.
First of all, the current world economy has got rid of negative impact of the global financial crisis. Comparing with most developed economies that have experienced a slight recovery, developing countries have achieved relatively faster economic growth. The emerging economies become the engine of the global economic development.
Secondly, international trade and foreign direct investment have been rapidly recovered. In particular, international trade has presented faster growth, with rising trade prices and larger amount of foreign direct investment in 2010.
Thirdly, financial control and risk management have been strengthened. On 21st July 2010, US President Barack Obama launched the 2010 Wall Street reform and Consumer Protection Act, with two central ideas of systemic financial risk control and financial consumer protection. EU plans to establish three authorities in 2011, responsible for supervising banks, financial transactions and insurance risks. Systemic Risk Management Board is about to be established as well to supervise systemic financial risks.
Finally, the reform of global economic governance has been launched and the G20 has become an important platform for international economic coordination. The G20 has a broader scale of members, with the participant of China, India, Brazil and some other countries, comparing with the G-7. There are three major problems within the current global governance structure. Firstly, there is no enough voice from the emerging economies which is incompatible with their increasing international economic positions and influences. The second is the unbalanced global distribution of benefits. Thirdly, regarding the global climate change issues, disagreements exist between the developing and developed countries.
International trade gives firms and households access to world markets for goods, services and knowledge, expands employment opportunities, and generates consumption gains by lowering prices and increasing the quality and variety of goods and services.