Understanding Global and National Trade Dynamics
Item 8:
1. Trade in the World Today
Trade is the exchange of goods between a producer (usually the seller) and a buyer (the consumer). Markets have historically been places where trade occurs. Initially, markets were physical locations, including buildings where goods were bought and sold. Currently, purchases can be made by mail, telephone, and the Internet. The market has become a mechanism for buyers and sellers to determine the price of a commodity. The amount of circulating products or services exchanged defines various markets, such as the labor market, securities market, exchange, and real estate market. Trade is carried out within a locality, between regions, or between states using current transport systems, facilitating the arrival of a large number and diversity of products to markets worldwide quickly and at a low price. Different areas specialize in certain products. Existing media and information channels allow real-time buying and selling around the world, with high levels of reliability (safety) in payments. A characteristic of the world economy is the increasing total volume of trade, driven by world trade liberalization promoted by the World Trade Organization (WTO). This has involved the elimination of tariffs and allowed many large companies, often multinationals, to create networks for the exchange of goods, people, capital (€), and information. World trade is not evenly distributed; it primarily involves the rich countries of America, Europe, and Asia.
2. Internal Trade and National Characteristics
Internal trade is the distribution of goods within a state. In Spain, trade has grown in recent years and is an important economic sector for its contribution to GDP and employment. Distribution networks: Goods often pass from a producer to a middleman (wholesaler), who sells to another dealer, and then to a retailer who sells to consumers. Most traditional trade consists of small establishments with few employees, typically family businesses that offer a good deal to consumers. The main problem today is competition from department stores, which has forced the modernization of operations and led to the closure of many small businesses. In many cases, the centers of large cities are gradually losing their commercial function. Department stores, including supermarkets and hypermarkets, began to be established in Spain in the 1970s on the outskirts of large cities. They offer lower prices than small businesses due to large orders, extensive product displays, promotions, discounts, and convenience. As a result, small businesses cannot compete. Distribution of internal trade: Commercial areas: The location depends on the population, purchasing power, transport, and communications. Trade is located in neighborhoods near towns with high population density and high per capita income. A commercial area is the geographical area encompassing municipalities where people are attracted to the municipality with more shopping centers, which serves as the core or capital. The most important commercial areas in Spain are currently Madrid, Barcelona, Valencia, Seville, Zaragoza, and Bilbao.
3. Foreign Trade and Balance of Payments
Foreign trade and international exchange involve the exchange of goods (exports and imports) with other countries. Since 1993, as a member of the EU, Spain’s trade has been affected by the opening of economic borders and the free movement of goods and people among member countries. Spain currently markets 70% of its exports and 59% of its imports within the European Union. The remaining international trade with other countries represents small percentages, notably with America and oil imports. In recent years, Asia, China, and India have increased their weight in this trade.
The balance of payments: Trade with other countries is important to a country’s economy, and the total value of these exchanges is reflected in the balance of payments. This is an indicator of a state’s socioeconomic development, recording economic exchanges in a particular period, normally one year. The balance includes:
- Current Account: Includes imports and exports of merchandise (trade balance), payments for services (balance of services), labor income and investment (balance of networks), and the difference between funds received from abroad and funds transferred (balance of transfers).
- Capital Account: Includes capital investments made by foreigners in Spain and Spanish capital abroad.
- Financial Account: Includes direct investments, finances, and reserves of national banks.
The Spanish balance of payments has the following characteristics:
- A constant trade balance deficit, as imports of oil, raw materials, and telecommunication equipment are higher than exports.
- A surplus in the balance of services, mainly thanks to tourism.