International Trade Impact

International trade has become increasingly important to the world economy as well as the U.S. economy. Trade accounts for about 25 percent of U.S. and world gross domestic product (GDP). It is growing at twice the rate of any other economic sector. In terms of the United States, one-third of the small firms that make an exportable product and would like to export do not presently export what they manufacture. Of the small U.S. firms that do export, nearly two-thirds export to only one country. The international flows of goods and capital that underlie international finance are critically important to the well-being of the world's nations. United Nations statistics show that the ratio of world exports to total gross domestic product has consistently increased since 1970. Much of this growth in world trade can be attributed to the liberalization of trade and investment because of reductions in tariffs, quotas, currency controls, and other restrictions on the flow of international payments. In addition, the advances in communications and transportation facilities and their concomitant reductions in cost have also facilitated the growth in international trade. Much of the trade liberalization has been accomplished by the implementation of several regional economic agreements and organizations.

Several regional economic agreements or organizations have been established since the end of World War II for the purpose of facilitating an expansion of trade. The governments involved in these efforts have recognized the value of expanded trade. Some of these blocs have committed to the major objective of reducing or eliminating trade barriers such as tariffs and quotas. Others have gone further and have established political as well as economic institutions.