Politics shapes the policies implemented in every aspect of world affairs. Global economy and international trade are no strangers to the purview of politics. In this case, Geopolitics impact on global trade to the point that it can change the pattern of trade. Cross-border goods and services exchanges don’t happen in an empty space. The playing field is geopolitics, which sets the course of trade with agreements. The top players set the trade routes to exert their dominance. Here, we will discuss in detail how geopolitics affect global trade patterns.

Geopolitics impact on global trade Agreements and Alliances

There are various kinds of agreements between nations for the development of various sectors. Among the wide array of agreements, defense and economic agreements take the cake. Trade and economic agreements are widely adopted by nations around the world. As a result nations in different corners of the world have come closer for cooperation. This, in turn, benefits all the countries involved.

Geopolitics influences global trade as countries with strong diplomatic ties create a bond between them through collaboration on boosting economic growth. Initially, in 1993, there were only 12 countries in the European Union, which later turned into 27 members. There is also an exclusive economic agreement for the European nations, which is the European Economic Area, following the footsteps of the EU later in 1994, currently having 30 member states. The EU and EEA have enabled open markets, making it easier for member states to conduct business efficiently. This has boosted the European economy by a huge margin. In 2023, intra-EU trade was almost 60% of total EU trade. A similar picture is seen in NAFTA, later becoming the USMCA agreement, bringing the North and Middle America closer economically.

On the contrary, tension between countries can lead to trade wars and economic sanctions. A country’s economy can suffer greatly through the isolation process. The trade war between the US and China beginning in 2018 has seen the imposition of tariffs on more than $450 billion worth of goods. This has negatively impacted the market and the consumers. Peterson Institute for International Economics revealed that, on average, the tariffs on Chinese imports rose from 3% to almost 20%.

Vulnerable Supply Chain in Times of Tension

The supply chain is heavily dependent on the stability of the nations related to the trade routes. As modern supply chains and trade routes are heavily interconnected, disruption in one place can send a rippling effect through the entire network. This will halt the flow of goods and increase the cost while causing delays.

The Russia-Ukraine conflict has proved how fragile the global supply chain can be if there is no unison. War in Ukraine shot up the prices of food. Ukraine was one of the largest exporters of wheat, accounting for 7% of the total wheat supply globally. The conflict led to an increase in wheat production by almost 110% and vegetable oil by 140%. This was because production was in decline, and the cost of shipping went up by nearly 50%.

Another example is COVID-19, which brought the global economy to a halt as businesses took a break. As businesses closed down, the supply chain broke down. Consumers couldn’t get their goods as businesses couldn’t procure them. During the Covid-19, the automotive industry lost nearly 7.7 million units of production. This resulted in a loss of $210 billion in revenue.

Strategic Trade Diversification

In recent times, top economies have started to diversify their trade partners. They have created and are collaborating on establishing new trade routes. This is mainly to reduce dependency on a single bloc partner as it will shield the nation’s economy in the event of a fallout.

One stark example is China’s Belt and Road Initiative (BRI), which was first introduced in 2013. This plan involves connecting nearly 150 countries through infrastructure development to make trade easier. Ports, railways and highways are being built to increase capacity and be more efficient. Since its inception, China has invested nearly a trillion dollars in the initiative. China is doing this to secure new trade partners and businesses rather than relying on its largest market, the US.

Sanctions and Economic Isolation

Sanctions aim to isolate a country in terms of economic strength. Even though it seems like the targeted nations face hardship, sanctions have far-reaching impacts on the global economy. Sanctions can change the course of trade flow and trade partners.

With decades-long sanctions, China has become Iran’s top buyer for its crude oil. But due to the recent more strict sanctions its oil export to China has reduced by more than 25%. Sanctions in Russia have created volatility in the energy market. Russia is one of the key players in the energy market. The country used to supply nearly 55% of Germany’s total gas before the war. Due to the war and sanctions, gas prices have gone up more than 40%. It’s because of supply chain disruption, and countries couldn’t trade freely with Russia and had to rely on expensive LNG from the US and Gulf countries such as Qatar.

Geopolitics impact on global trade and influences the supply chain and access to technology. It also decides which nations are going to be business partners. As the globalized world becomes more polarized, more and more nations seek to diversify their trade systems. Through the formation of new alliances and agreements, countries hope to bypass the fallout of conflicts to keep the economy running like a well-oiled machine.

Science and technology have brought revolutionary changes in every aspect of human civilization. The global economy has drastically changed since the Industrial Revolution. It brought about a massive shift towards international trade. The digital era of electronics and the internet has refined trade practices over time. It has changed how businesses operate and conduct transactions across borders. Now, businesses can access markets in different parts of the world easily. Here, we will discuss the role of technology in modern trade practices and its influence.

Modern Trade Practices with Technology

In the past, trades were not as widespread as the present times. Back in the day, the world was not as connected, and merchants were still discovering different parts of the world. But the industrial revolution has made it easier to travel between countries with ships having engines rather than relying on the waves and winds. Then came the digital age, where technology made it easier than ever to connect with people from around the world. Now, small and medium-sized enterprises can partake in global trade.

A 2022 study by McKinsey found that 40% of companies believe that digital technologies have a huge impact on the improvement of operational efficiency and trade activities. Digitalization has shortened the period of time for paperwork related to trades. It has made it easier to keep track of goods in transportation. Moreover, it has improved the overall logistics and reduced the cost of transactions across the world.

Key Technologies in Transforming Trade Practices

E-Commerce Platforms and Digital Payment Systems

E-commerce has connected business owners with customers from different parts of the world. Now, people can shop and take services from various businesses that are not limited by borders. Platforms such as Amazon, Alibaba and Temu have had far-reaching effects on global trade. They have essentially shaped the future of the retail market. In 2025, e-commerce contributes to almost 21% of the global retail market. The figure is expected to reach nearly 23% by 2027.

Artificial Intelligence in Data Analysis

AI has made it easier to go through numerous amounts of data within a short period of time. So, it is easier to predict fluctuations in various indicators with AI. Demand forecasting and pricing analysis can be easily done with the help of AIs. This will help businesses take measures to safeguard their interest by taking proper decisions. Statista predicts that the AI market in supply chain and trade will reach an approximate $243.70 billion by 2026. More and more industries are expressing their interest in adopting the new AI technology to make their businesses better.

Blockchain Technology

Blockchain technology has brought more security and transparency in the trading world. The ledger of blockchain technology keeps track of various transactions. The encryptions on blockchains are really hard to crack, making them less vulnerable to hacks. This will help in reducing risks. The WTO estimates that adopting blockchain technology on a scale will aid in reducing inefficiency which will boost global trade volume by more than 5% annually. Many companies related to global trade, such as Maersk and IBM, have adopted blockchain platforms like TradeLens. They are able to handle over 2 million shipping events yearly.

Real-Time Monitoring

Businesses have implemented IoT devices such as GPS trackers and smart sensors. These gather data in real time, giving details about goods during transportation. By using these devices, more accurate information on temperature, humidity and location can be derived. This will ensure products stay in the best quality during transit which will reduce waste and increase efficiency.

Benefits of Technology in Trade

Better Efficiency

The World Economic Forum has reported that adopting digital systems has cut custom clearance time by up to 90%. Digital systems have reduced paperwork, which has reduced errors and delays. Thus, custom processes have become a lot faster.

Cost Reduction

PwC study found that businesses that used AI saved 15% on logistics expenses. AI and blockchain have made systems efficient. AIs can do data analysis and predict the best route for the supply chain, which helps reduce costs.

More Accessibility

Even small and medium businesses can now access these cutting-edge technologies. They can take advantage of AIs to create their business model and run them efficiently. Anyone can start a business from any corner of the world with the help of e-commerce platforms such as Amazon and Shopify to cater to the needs of billions of people globally. As of now, Shopify supports 500,000 businesses globally.

Technology has made it easier than ever to do business. With the help of technology and proper implementation, businesses can grow at a breakneck speed. Just as e-commerce changed the shopping system in the early 2000s, AI is shaping the business landscape in the 2020s. So businesses should work with tech developers to develop even more efficient systems that will boost global trade even further.

Keeping up with the ever-increasing scale of global trade, the shipping logistics industry has evolved. This industry has become the lifeblood of the global economy. Modern shipping logistics have connected producers with consumers directly. This has made doing business much easier. More and more countries are connecting with each other taking advantage of the global shipping routes. As trade volume increases, so Carbon footprint in shipping logistics showed. This ultimately has effects on the environment. 

The International Maritime Organization has reported that global shipping is responsible for 2% of total global greenhouse gas emissions. To save our planet a lot of initiatives have been taken in recent times to reduce emissions in every sector. Here, we will discuss various sustainability initiatives and methods to reduce carbon footprints in shipping logistics.

Carbon footprint in shipping logistics

There are various stages in shipping logistics. Each step requires energy, and the result of the by-products is greenhouse gas emissions. Carriers that transport cargo are the most responsible for emissions. These carriers can be land, sea, or air-based.

In 2023, maritime shipping emitted nearly 706 million metric tons of CO₂, according to Statista. It is a huge amount of emission from just a single part of a large sector. This is even greater than the emission of an industrial giant such as Germany, which emitted nearly 656 million metric tons of CO₂ in 2024.

Air freights are even worse performers in emissions. Air freights emit 500 grams of CO₂ per metric ton kilometer. This number is very high compared to just around 10-40 grams in sea shipping.

The situation doesn’t get better on land. It gets even worse as there are lots of vehicles plying on roads and highways. Internal combustion engines of cars are the biggest contributors to global emissions. Trucking alone causes almost 25% of global CO₂ emissions. Without proper implementation of measures, emissions might increase by more than 50% by 2050.

Strategies for the Reduction of Carbon Footprints in Shipping Logistics

Fuel Alternatives

Fossil fuels are responsible for the emission of greenhouse gases. Green fuels will significantly lessen the burden on the environment. Some of the alternative fuels to currently used fuels are:

• Biofuels: These types of fuels can reduce emission rates by a large margin. Some biofuels are capable of reducing emissions by nearly 86% compared to traditional fossil fuels. One stark example of this is cellulosic ethanol, which is capable of achieving this high rate of reduction.
• Liquified Natural Gas: LNG produces nearly 23% less CO₂ than traditional marine fuels. Moreover, LNG produces fewer pollutant particles such as nitrogen oxide and sulfur-based particles.
• Hydrogen and Ammonia Fuel: Hydrogen doesn’t have any carbon footprint so it can achieve near zero greenhouse gas emission. Ammonia is a carbon-free fuel that can be produced from biomass, solar, and wind. Both can contribute highly towards a greener future.

Electrification

Using electric equipment rather than traditional fuel-powered equipment can reduce the carbon footprint in the shipping logistics industry.

• Electric Trucks: Traditional diesel combustion trucks emit a lot of greenhouse gases and pollutants. Electric trucks can greatly aid in alleviating this situation. Electric trucks produce nearly 63% less emissions compared to diesel trucks. The reduction can go as high as 84% if renewable sources are used for charging these trucks.
• Green Ports: The world is moving towards embracing electric equipment in heavy industries. Electric cranes, forklifts, and cargo handling equipment can greatly contribute towards the reduction of greenhouse gas emissions by reducing the usage of diesel. The port of Los Angeles has been able to reduce its diesel particulate matter by 84% and Sulfur oxides by 95% compared to the 2005 level. This was possible due to embracing electrification, which reduced the usage of diesel.

Optimizing Supply Chain

The global supply chain has become so complex with various networking converging. Sometimes, this can lead to redundant routes. By improving these clutters in the supply chain, the waste of fuels can be reduced.

• Route Optimization: Advanced AI can be used to analyze data to properly optimize routes. This will lead to more fuel efficient routes as well as reduce the time of transportation by nearly 20%. DHL has used AI for route optimization, and they were able to reduce emissions by almost 8%.
• Load Optimization: By utilizing the full capabilities of bulk carriers, more containers can be transported per trip. This will reduce trips and usage of fuel.

Green Technology

• Energy-Efficient Ships: Modern ships can take advantage of green fuels such as Hydrogen, solar panels, and biofuels. Moreover, new ship designs include wind-assisted propulsion, which can reduce fuel requirements by 20%. Systems such as rotor sails and wing sails can provide extra power to the ship without using fuel sources.
• Carbon Capture Technology: The new development in this field has made it possible to capture greenhouse gases to reduce the burden on the environment. Ships can adopt a modular version of this technology to reduce emissions.

Carbon footprints are a big issue that requires novel technologies and sustainable measures to deal with. Newer technologies and optimization in transportation can positively impact emissions. As the economy can’t move forward without shipping logistics, policymakers should take measures to curb carbon footprints as much as possible.

Usually, when we think of import and export, we think about international trade and the global economy. But import-export activities have reverberating effects on the local economy. They connect domestic businesses to the international trade networks. This creates advantages for the local communities to expand their economies. Businesses can afford to expand due to more demands resulting in more employment of the local population, leading to growth of the overall economy. Thriving local economies are an indication of sustainability in the long run. Here, we will discuss in detail import and export impact local economies

The Basics of Import-Export Trade

Import-export is a system of exchange of goods and services from one country to another. Import is the process of bringing resources from foreign countries. This can be raw materials for industry, products unavailable domestically or just goods that are not produced at home. On the other hand, export is the process of sending domestically produced goods and services abroad. Through exports local economies are able to take part in the global trade, having access to larger markets and being able to sell more products this is shortly how import and export impact local economies.

In 2024, global trade volume reached a record amount of $33 trillion, which is a 3.3% increase from the previous year. At the same time, trade-in services saw a 7% increase. In the year 2024, exports accounted for almost $15.6 trillion, while imports were $17.4 trillion. This huge trading of goods and services has a greater impact on the economies of the participating countries by influencing their GDP, labor market, and industrial base.

Exports and Local Economies

A country’s economic growth largely relies on exports of its goods and services. Having access to larger markets, local economies can supply their goods and services to more consumers. This, in turn, enables local economies to scale up and increase revenue while creating new jobs.

Job Creation

Export based countries create more job opportunities as they expand faster compared to other economies. The US Department of Commerce has reported that every $1 billion in export supports nearly 5,800 jobs in the US.

Countries with high exports tend to have lower unemployment rates. Countries with heavy export-based economies, such as China, Japan, and Korea, have lower unemployment rates as their industries have created more job opportunities. As of 2024, China has a population of almost 1.4 billion but has an unemployment rate of around 5%. On the contrary, Sudan has a population of just 51 million but has the highest unemployment rate of 49.5%. This is due to the industrial base and export-based economy in Sudan. Other factors, such as education and political instability, also factor in.

Economic Growth

Export is directly related to GDP. A country that exports more has a trade surplus, leading to a growth of its GDP. In 2023, Germany earned 43.4% of its GDP through its exports, which is almost half of its GDP. In 2024, Vietnam’s export-driven economy saw its GDP grow by 7.09%, which was more than the targeted 6.5%. This is largely due to the country’s industrial base of electronics and apparel that have a huge market in the EU and America. So exports play a huge role in the growth of GDP.

Market Diversification

Export activities give access to cross-border consumers. So local economies don’t have to rely on the domestic market. If there is trouble in the local market, they can bypass the turmoil by focusing more on exports. Many local economies of developing nations are taking advantage of global e-commerce platforms, such as Amazon Global Selling, to promote their business around the globe. In 2024, Amazon Global Selling reported an almost 30% increase in cross-border trading. So it’s quite evident that local businesses are continuously expanding their territories.

import and export impact local economies

Imports have their own benefits. Through imports, countries can supply the much-needed raw materials for their industrial base and improve their economic health. It can also supply the population with the necessary goods for overall growth.

Access to Affordable Goods

Importing products creates competition on a local level. Various companies are able to offer competitive prices and fight for prices. This has the positive side of increasing accessibility for consumers to goods and services at an affordable rate. For instance, wide-scale Asian-made electronics have contributed to the reduction of the price of electronics worldwide.

Supply Chain Optimization

Many export-based economies rely on raw materials from other countries. Export giants like China, Germany, and Japan rely on other countries such as Australia, Russia, and the US for their energy requirements. China imported $219 billion worth of energy raw materials from Australia which is equal to 32% of Australia’s total exports. Germany was heavily dependent on natural gas from Russia, which changed after the Russia-Ukraine war. Now, Germany imports a huge amount of LNG from the US for its industrial needs. In 2024, Germany imported 27.5 billion cubic meters of LNG just from the US. The flow of these raw materials ensures the industrial base keeps on running like a well-oiled machine.

In 2024, TSMC, the largest chip manufacturer, imported fab equipment from ASML worth billions, as ASML reported a total of €28 billion in sales. At the same time, TSMC made a revenue of $87.8 billion. So import plays a critical role in the supply chain and has a correlation with exports.

Import and export are interconnected with each other. They make up the modern economies. Export drives the growth of an economy by creating jobs. At the same time import ensures the continuation of that export growth by providing raw materials and access to affordable goods and essential technologies. Local economies can thrive and develop at a rapid pace by balancing the import and export activities.

Global trade has connected markets and businesses from across the world. This has enabled the growth of the economy worldwide as it has created a web of networks starting from production to distribution and transportation in between. It is known as the global supply chain. The intricate network of global supply chains has big effects on the environment. It requires lots of energy to keep it running like a well-oiled machine. Greenhouse gas emissions and waste generation are two of the most significant ways global trade exacerbates environmental damage. But by adopting sustainable practices, industries can reduce the burden on the environment by a big margin. This will ensure the long-term survivability of the global trade industry.

The Environmental Impact of Global Trade

Global trade has a deep impact on the environment, even though it might not be visible on the surface. The International Maritime Organization has reported that international shipping contributes to 2% of global CO₂ emissions, which is roughly equal to 700 million tons of CO₂ annually. At the same time, the World Bank has reported that manufacturing and packaging related to globally traded goods have generated billions of tons of waste per year.

As international trades expand, keeping up with the increasing demands, so do transportation activities. This has equally impacted water, soil and air pollution. The aviation industry accounts for very little in global shipping, but that small percentage still contributes to the 2.5% of global CO₂ emissions. If proper measures are not taken to address the emissions issues of global trade, emissions might increase by 40% by 2050.

Sustainable Practices

Green Logistics and Transportation

Transportation of goods is a key part of global trade. In order to make global trade sustainable, more focus should be given to transportation. Some of the initiatives to make the process more sustainable are mentioned below.

• Energy Efficient Shipping: In order to promote environmentally friendly ships and maritime engines, IMO has introduced the Energy Efficiency Design Index. This will encourage shipbuilders and shipping companies to adopt more green and energy-efficient ships.
• Alternative Fuels: Naval industries are also working to develop ships that will be able to use fuel with less environmental impact than the oil ships currently use. The use of biofuels, LNG and Hydrogen can reduce carbon emissions substantially. As the world’s largest shipping industry, Maersk has pledged to be carbon neutral by 2040. This target will be accomplished by decreasing reliance on conventional fuels and using green methanol and low-emission technologies.
• Electrification: The EV industry is growing rapidly and consumers are adopting at a faster rate to ensure sustainability. Moreover, trucks and cargo haulers are also taking advantage of this rapid advancement. Even the shipping industries are shifting towards creating solar panel-based electric ships.

Digitization and Smart Trade Technologies

Digital tools can reduce waste by increasing efficiency in supply chains. Some of the technologies to adopt are:

• Blockchain Technology: Using blockchain technology will ensure transparency in the supply chain. The ledgers will contain all the data that the parties involved will be able to access easily. This will reduce fraud and waste of time as businesses will be able to keep track of their goals.
• AI Powered Logistics: By analyzing data AI can help generate optimal routes for shipping. This increases efficiency and reduces the time of transportation which reduces fuel usage and cost. Global shipping companies like DHL have reported an 8% reduction in emissions by implementing AIs into their optimization.

Sustainable Packaging

Packaging materials are a huge contributor to global waste. Consumers usually discard them after receiving their goods. Some of the ways businesses can reduce this waste are:

• Biodegradable and Recyclable Materials: Plastics have long been used in packaging. They are not biodegradable and tricky to recycle, so they are the most common pollutant on the planet. Nowadays paper based and biodegradable plastics from cellulose are gaining traction for alternative packaging. Companies that use paper-based alternatives for packaging have reported a 30% dip in waste. Adopting these greener packaging widely will ensure long-term sustainability.
• Reusable Packaging Systems: Rather than discarding after a single usage, packaging materials can be used multiple times to reduce waste. Various e-commerce giants, such as Amazon, are taking the initiative to implement this system.

Sustainability in global trade has become a must. It is for a better future for our posterity. Green practices such as green logistics and digital innovations can greatly help in the reduction of carbon footprint. For a better and greener tomorrow stakeholders should collaborate with one another to implement the measures necessary.

International trade involves various parties from different parts of the world. So, to facilitate this type of exchange of goods and services, a common ground is needed for payments. That is where exchange rates come in. It’s a vital component of international trade and has a huge influence on the flow of goods and services around the world. The currency exchange rate has a huge impact on competition among businesses. Here, we will discuss the mechanisms of currency exchange rate and their impact on global trade.

What are Currency Exchange Rates?

Currency exchange rates are prices at which one currency can be exchanged for another. The rates determine how much a currency is worth against another. There are various factors that play into the fluctuation of rates. Some of these are interest rates, inflation, political stability and economic situation. Mainly there are two types of exchange rates.

• Fixed Exchange Rates: In this case, the value of a currency is pegged to another currency. Usually, it’s the currency of a big economy that does lots of business with the country that is pegging its currency. One example is the Japanese Yen pegged to the US dollar. Moreover, instead of pegging to a single dominant currency, a currency can peg its value to a basket of currencies for its diverse export markets.
• Floating Exchange Rates: In this system, exchange rates depend on the supply and demand of that particular currency. If the supply is more than demand, the exchange rate goes down, whereas if the demand is high but there is not enough supply, then the price goes up.

As of January 11th 2025, 1 USD is 0.98 euros. If the price of a product is 100 USD, then the price of that product would be 98 euros.

Impact on Trade

Exchange rate fluctuations reverberate throughout the global economy. They impact the price of goods and services. This alters the supply and demand dynamics across borders. Some of the key implications are:

Trade Volume Fluctuations

The increase and decrease of the exchange rate has an impact on the country’s trade volume. If a country’s currency depreciates in the international market, more countries are likely to engage in business with that country. Due to the cheap rate, the depreciated currency will be able to provide goods at a lower price. This is a huge upside for an export-based economy, a country that exports more than it imports. The International Monetary Fund (IMF) found that a 10% effective depreciation of the currency can increase that country’s GDP by 1.5% in real net exports terms. On the other hand, a country will suffer a higher cost of import if the country’s currency depreciates and it has an import-based economy.

Emerging Markets and Exchange Rates

Emerging markets tend to have higher volatility when it comes to exchange rates whereas developed countries do not experience the same. From 2010 to 2020, the Brazilian Real against the US dollar faced around 15% annual volatility on average. During the same period, the Euro faced only 7% volatility. Emerging markets that adopt the floating exchange rate can alleviate this volatility. It will promote more export growth compared to the fixed exchange rates.

Currency Wars and Trade Deficits

In 2018 the trade deficit of the US with China peaked, reaching $323.32 billion. This value only represents the value of goods traded. The deficit widens due to Chinese products being cheaper. So the US consumers could afford more Chinese products. A weaker Yuan facilitated the growth of the deficit as the US consumers had more purchasing power against the Yuan.

Exports and Imports

Weaker currencies promote more exports. Japan is a huge beneficiary in that account. It benefits from the depreciation of Yen as it is an export giant. The Japanese Yen reached an all-time low against the dollar in April of 2024. This greatly benefited the auto industry of Japan as companies were able to export more of their cars into the US and offer competitive prices. Moreover, they saw a tourism boost due to its depreciation as more people travelled there. Japan’s appreciation of Yen is what keeps the country up at night.

A strong currency has better purchasing power. So they can import goods cheaply. Too much import of goods cheaply can affect the industrial base of the country.

Currency exchange rates are part of global trade dynamics. Their fluctuations heavily influence the export and import of a country. A favorable exchange rate can boost trade and fuel the growth of the economy. So, policymakers should adopt systems that will benefit from the advantages of exchange rate fluctuations.

Globalization has changed the way businesses operate. This is more noticeable in the realm of international trade. By making countries more interconnected, export and import of goods have been made easier. This opens up access to various markets around the world and increases efficiency while decreasing cost. Moreover, globalization has promoted competition among businesses that has driven innovation in various sectors so that companies can stay ahead of each other. Here we will discuss in detail how globalization affects import and export business.

More Market Access

Globalization has reduced trade barriers. So, it’s now easier than ever to commence international trade. Businesses can trade goods and services on international markets. Despite the rising inflation and the speculated looming recession, the World Trade Organization reported a 2.7% increase in global trade volume in 2024. This beats the forecast for 2024 by 0.1%. Trade has increased due to trade agreements among countries and the elimination of tariffs.

Globalization has made it easier for small and medium sized businesses to export their products. Cross border trading has become a boon for many emerging economies. Asia-Pacific Economic Cooperation reported that SMEs contribute to 35% of direct exports for their economies. Businesses can source materials with ease from various markets rather than depending on a single source. This increases competition and enables businesses to provide a wide range of goods on a regular basis.

More Competition

Globalization has made it easier to reach far corners of the planet. So it has also made businesses more ambitious for the global market spread across different countries. They compete with each other to provide the best quality at a competitive price.

The United nations conference on trade and development reported 80% of world trade is carried out through Transnational Companies. Clearly then, the global marketplace has been dominated by the major players, leaving very little room for smaller players. In 2023, China alone represented 14.1% of the total world exports. This is because of the strong manufacturing base in China, particularly when it comes to electronic and machinery. As a result, they are able to offer a competitive price to the global market.

Competition allows for innovation and adoption of newer technologies. Besides, it also forces businesses to provide top notch services to its consumer base.

Advancement in Technology

Since Globalization has increased competition among businesses, they have to be innovative to stay ahead. The digitalization of trading systems has improved logistics. This has enabled faster delivery and payment systems. One of the examples of this is e-commerce platforms which have greatly affected the import and export market.

According to Statista, cross border e-commerce will grow at a compound annual growth rate of 19.6% by 2026. The total value of trade will reach $3.9 trillion by 2026. Almost half the businesses involved in exporting and importing use advanced supply chain management tools. Cross border businesses have found usage in blockchain to provide transparency enabling faster customs processes. This will result in cost reduction.

Vulnerability to Global Crises

Globalization connected countries resulting in intricate webs of supply chains. They are extremely efficient in the absence of difficulty, but a single flaw in the web can send things substantially haywire. This can be the cause of some of the most drastic dips. The global supply chain was disrupted by COVID-19 and this is largely observed. Then came the Russia Ukraine war which put even more strain on the economic condition while the world was still reeling from the shattered economy caused by COVID-19.

Global trade volume fell by 9.2% in 2020 according to the World Trade Organization. According to the World Bank, elevated shipping costs contributed almost 5.9% to import price inflations during the pandemic years. Furthermore, in 2022 transport cost of bulk goods increased by more than 60% as a result of war in Ukraine.

Globalization has both upsides and downsides. But if you ask anyone, they will probably all emphasize the former. It is true that while some hiccups along the way can cost businesses a lot, they can make that up in the long run with better connectivity and efficiency. Export and import businesses will thrive and flourish with further implementation of globalization.