Trade is at the root of economic development. The
easy movement of products and services across borders helps create an
interconnected world where opportunities for international goods and companies
abound. A paper by Dzerniek-Hanouze & Doherty (2013) discussed the
significant advantages that can be found by opening trade routes at a national
and regional level to ensure that products and services move smoothly to their
destinations.
All trade is based on selling products from one entity to the next. According
to Black’s Law Dictionary
Trade is ,”The act or
business of exchanging commodities by barter; or the business of buying and
selling for money; traffic; barter.” A value laden product
must transfer hands from one person to the next while a reciprocal value laden
item (i.e. money) is exchanged in return.
Before revenue can be earned through the selling of
products these products must be available and present for purchase. This means
that the product is available on store shelves, online, or in the locality for
customers to purchase. The buyer and seller must be connected together in some
way through virtual or physical means to exchange information, items, or
financial value.
The same process must occur when products and
services are built. Available items are used to construct higher level products
to earn more on the market. Unnecessary tariffs, restrictions, and levies
between suppliers and creators directly reduce the possibilities of further
growth and development. This means fewer products are shipped out and less
revenue gained.
The supply chain is the vine that is used to move
products and services. When tariffs by importing countries are high it impacts
the cost and quantity of those products being moved. As costs increase the
likelihood that they will be purchased by locals is reduced; it is a customer
equity choice. Tariffs are a direct attempt to damage the supply chain
mechanisms.
Improving the flow of products and services is
important in speeding up the economy. For example, improving upon inspections,
security technology, communications, and transport can also improve upon the
costs of moving these products. Lower costs can often result in improved
revenue for companies that rely on imported supplies.
The concept of economic hubs doesn’t make it exclusively
into the paper but the author does indicate that reduced borders increase the spillover
effects in management, technological know-how, and access to new technologies
that move beyond the goods themselves. The production of products and services
enhances the skill and abilities of multiple sectors within the economy.
The authors offered some interesting statistics. For
example, the World Economic Forum, The World Bank and Bain & Co. in 2012
indicated that reducing trade barriers could increase global gross domestic
product by $2.6 trillion or 5%. Ebay
also indicated in a study that removing virtual barriers improved small
business growth by 60-80%. The end result of their analysis is that if
countries moved half-way to best practice there would be a 4.7% GDP increase, a
moderate reduction of restrictions would improve GDP 2.6%, and a removal of
tariffs would result in a .7% increase in GDP.
Drzeniek-Hanouz, M. & Doherty, S. (2013). Trade
facilitation, international supply chains and SME competitiveness. International Trade Forum, 4
