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International Trade

corruption on the part of recipient governments that INTERNATIONAL
resulted in IMF funds being stolen and/or wasted. Also, TRADE
there have been a number of instances in which IMF
The world has a long, rich history of international trade
efforts have been assessed as unsuccessful. Recommended
that can be traced back to early Assyrian, Babylonian,
restrictive fiscal policies have been seen as causing trouble-
Egyptian, and Phoenician civilizations. These and other
some conditions, such as food shortages and citizen
early civilizations recognized that trade can be tied directly
unrest. Nobel-prize-winning economist Robert Mundell, to an improved quality of life for the citizens of all the
for example, has taken the position that current IMF pol- partners. Today, the practice of trade among nations is
icy options are insufficient to achieve stable international
growing by leaps and bounds. There is hardly a person on
currency exchange and thereby foster international trade.
earth who has not been influenced in some way by the
He recommends that a global currency and world central growing trade among nations.
bank be created to establish a stable international cur-
rency.
WHY INTERNATIONAL TRADE?
SEE ALSO Global Economy; International Investment; Modern countries engage in international trade for
International Trade numerous reasons. Some countries are deficient in critical
raw materials, such as lumber or oil. To make up for these
various deficiencies, countries must engage in interna-
BIBLIOGRAPHY
Ethier, Wilfred J. (1998, September). Essays in International tional trade to obtain the resources necessary to produce
Finance, No. 210. “The International Commercial System.” the goods and/or services desired by their citizens. In addi-
Princeton, NJ: International Finance Section, Department of tion to trading for raw materials, nations also exchange a
Economics, Princeton University. wide variety of processed foods and finished products.
Fischer, Stanley, Cooper, Richard, et al. (1998, May). Essays in Each country has its own specialties that are based on its
International Finance, No. 207. “Should the IMF Pursue economy and the skills of its citizens. Three common spe-
Capital Account Convertibility?” Princeton, NJ: Interna- cialty classifications are capital, labor, and land.
tional Finance Section, Department of Economics, Princeton
Capital-intensive products, such as cars and trucks,
University.
heavy construction equipment, and industrial machinery,
Gotherstrom, Maria (1998). “Development and Financial Struc- are produced by nations that have a highly developed
ture of the International Monetary Fund.” Economic industrial base. Japan is an example of a highly developed
Review—Sveriges Riksbank, previously Quarterly Review— industrial nation that produces large quantities of high-
Sveriges Riksbank (Stockholm) 4, 60-74.
quality cars for export around the world. Another reason
International Monetary Fund (2005). “The IMF at a Glance.” Japan has adapted to producing capital-intensive products
Retrieved October 26, 2005, from http://www.imf.org/
is that it is an island nation; little land is available for land-
external/np/exr/facts/glance.htm
intensive product production.
Kenen, Peter B., ed. (1996, October). Essays in International
Finance, No. 200. “From Halifax to Lyons: What Has Been Labor-intensive commodities, such as clothing,
Done About Crisis Management?” Princeton, NJ: Interna- shoes, or other consumer goods, are produced in countries
tional Finance Section, Department of Economics, Princeton that have relatively low labor costs and relatively modern
University. production facilities. China, Indonesia, and the Philip-
The Operations of the Department of the Treasury’s Financial pines are examples of countries that produce many labor-
Crimes Enforcement Network: Hearing before the Subcommittee intensive products. Products that require large tracts of
on General Oversight and Investigations of the Committee on land, such as cattle production and wheat farming, are
Banking and Financial Services, U.S. House of Representatives. examples of land-intensive commodities. Countries that
1998, 105-55. Washington, DC: U.S. Government Printing do not have large tracts of land normally purchase land-
Office. intensive products from countries that do have vast
“What Is the International Monetary Fund?” (2004). Retrieved amounts of suitable land. The United States, for example,
October 26, 2005, from is one of the leading exporters of wheat. The combination
http://www.imf.org/external/pubs/ft/exrp/what.htm. of advanced farming technology, skilled farmers, and large
Williamson, John, and Mahar, Mary (1998, November). Essays tracts of suitable farmland in the Midwest and the Great
in International Finance, No. 211. “A Survey of Financial Plains makes the mass production of wheat possible.
Liberalization.” Princeton, NJ: International Finance Section,
Over time a nation’s workforce will change, and thus
Department of Economics, Princeton University.
the goods and services that a nation produces and exports
will change. Nations that train their workers for future
Bernard H. Newman roles can minimize the difficulty of making a transition to

422 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION