Economic Trading Issues That Need to Be Addressed
Among the many economic trading issues that need to be addressed, intellectual property protection and cultural differences are just a few. While these issues aren't always easy to deal with, they are crucial to achieving peace among nations. The terms of trade are also based on supply and demand.
Demand and supply conditions determine the terms of trade
During the past couple of decades, the volume of international trade has risen significantly. This has been driven by technological advances, such as the development of commercial civil aviation and the democratization of the telephone as the primary mode of communication.
The terms of trade are the relationship between a country's export prices and its import prices. In general, the more exports a country produces, the more imports it receives. This leads to a positive trade balance for the producing country. But not all countries benefit from international trade in the same way.
A demand curve spells out how much of a certain item a consumer is willing to purchase at a given price. As prices rise, the curve will slope downward. As prices drop, suppliers will drop out of the market. This is because the marginal utility of a consumer's consumption is higher than the price of the product.
Language barriers
Among the many barriers to economic trading, language is a significant one. Early traders understood that they needed to understand their clients to produce good economic returns. While technology has helped to knock down some of the trade barriers, language remains a critical factor.
Research has examined the adverse effects of trade on linguistic dissimilarity, transportation and administrative costs, as well as cultural differences. The effects are similar to those of geography.
Studies have shown that trade rates are higher when trading partners share a common language. This can be done through a shared official language, such as English, or a common spoken language.
The ability to communicate in a foreign language is crucial for companies looking to do business abroad. Miscommunications can have dire repercussions. In one study, 44% of respondents said that miscommunication caused delays in projects. However, in the context of international trade, the costs of miscommunication can be significantly higher.
Cultural differences
Despite the increasing globalization of economic trading, there are still some important differences in the way people from different countries do business. These differences can have serious consequences.
In fact, cultural differences can influence buying and selling decisions. In addition, they can affect negotiation tactics. And, in some cases, they can result in unintentional missteps. Understanding these differences can help to determine whether a business opportunity is successful or not. This article explores the implications of cross-cultural differences on international trading patterns.
The study aims to identify the cognitive mechanism by which the effects of cross-cultural diversity on economic decision making are manifested. It does this by comparing the effects of a number of factors on the global economy. It also shows that specific features of countries contribute to cultural diversity in international trading.
Intellectual theft
Despite the proliferation of intellectual property rights (IP) protection, a large number of jurisdictions still do not recognize trade secrets as real IP. While trade secrets enjoy minimum protections across WTO member states, specific estimates vary by country. Nevertheless, global trends suggest that trade secrets are outpacing patents in terms of their usage.
Trade secrets are a good a way to protect patents and trademarks. In fact, a recent survey suggests that trade secrets are a better way to protect IP. While older firms in the mechanical and materials engineering sectors favor product patents for competitiveness, trade secrets are more effective in defending process technologies.
The best estimates suggest that theft of trade secrets may be costing advanced industrial nations hundreds of billions of dollars each year. Nevertheless, the economic impact of trade secrets is largely unknown.
China and the United States willing to export more
During the past four decades, trade between the United States and China has grown tremendously. By 2017, trade between the two countries was worth over 600 billion dollars. This represents an increase of almost five times what it was in 2001.
Trade between the United States and China is a complex economic relationship. It involves both markets and non-market economies.
Trade is important to both countries because it provides higher profits to corporations and lower prices for consumers. However, trade is also costly. In fact, the United States' trade deficit with China was $285.5 billion in 2020. This trade deficit has been a concern for policymakers.
In order to reduce trade imbalances, the Trump administration has implemented several tariff measures. In addition, the Treasury Department designated China as a currency manipulator for the first time in decades.