We begin with a brief history of global trade. Humans, tribes and countries have been trading with one another for time immemorial. For as long as there's been history, there has been trade. This painting shows two 19th century clipper ships, all sales, small hall, which were the fastest mode of international transport during much of this 1800s until superseded by steam locomotion. They could sail from England to Australia in the record breaking time of 63 days. Imagine that, for about two months. Today, Qantas Airlines makes the trip in only 18 hours. Quite a difference. One of the oldest known trading routes and perhaps the longest and most successful in the history was the Silk Road. The Silk Road was a network of many trading routes that originated in China and ended at the Mediterranean Sea and Europe. Across by land from China to Baghdad through the Middle East, on to the Mediterranean, and then into Europe. It had a sea route that started in China and in the Malacca as they famous Spice Islands moved to India, then either to Baghdad in the Middle East or into the Red Sea, and then on to Europe. The Silk Road was the main means for transporting silks, spices, porcelain and ivory, other highly value goods to the Middle East and Europe. It took many weeks and months to transport those goods between China and Europe with goods passing through many hands along the way. From Europe, woolens, carpets, curtains, blankets, rugs, ornamental glass, precious metals, and Slavic slaves were traded to Asia and the East. While the ancient Silk Road is perhaps the most famous and well-known ancient trading routes extent, it is certainly not alone. As this map demonstrates, trade in medieval times was vigorous and extensive, with trade occurring across regions, countries, and continents. Further, archaeological evidence has found that trading routes existed across the Americas, including trade between the peoples of South, Central, and North America. Similar trading routes existed in sub-Saharan Africa and undoubtedly in Australia. There's nothing more human than to trade for mutual advantage, including trade over very long distances. As this chart shows, global export trade has accelerated exponentially over the past two centuries and in the recent decades. Starting in 1800, it increased gradually until about 1950 when it just exploded exponentially to where we are today. Not only has the scale of global trade increased over time, it's importance to the world economy has also increased. This chart shows the percentage of world economic output is measured by gross domestic product that's due to international trade. From a low of about 10 percent during the Great Depression in the 1930s, global trade now accounts for 60 percent of global economic output. This suggests that without global trade, global economic output would be dramatically smaller than it is today. So sustaining global trade is critically important or sustaining the welfare of the world's peoples. Global trade helps the world economy, but is it helpful for the economies of individual countries? This slide demonstrates that there's a positive correlation between change in a country's economic growth that's the x-axis and a country's export growth. Well, correlation is not causation, other analysis and research suggests a strong causal link between expert growth and economic growth. These two charts show the growth of global exports and imports over the past decade. Truly trends are strongly positive. However, more interesting is that export growth is growing much more rapidly for developing countries than for the developed world. We can hope that this growth implies improving prosperity for the peoples of these developing countries. This graphic shows aggregate trade flows between major economic regions. Not surprisingly, trade between North America and Europe is large as is trade between Europe and Asia and between North America and Asia. There's less trade between Latin America or that is to say South America and Asia, not surprisingly, and very little trade with Africa. Pause the video for a moment to take a look at this trade flows in more detail. The question that naturally arises is, well, what exactly is traded and who's doing the trading? This busy infographic shows the top 18 internationally traded goods, their annual value and involved trading countries. The top five or six are automobiles, refined petroleum, that means things like jet fuel and gasoline and other byproducts of petroleum. Integrated circuits, meaning computer chips, vehicle parts, computers, and pharmaceuticals. Perhaps most interesting is down here, human or animal blood, which accounts for about one percent of all international trade, and this isn't going to Transylvania for consumption by vampires instead, this category includes blood products to use for therapeutic, prophylactic, or diagnostic uses such as plasma and vaccines. Not nearly as interesting as Transylvania. When we're considering global trade, we often think only of manufactured goods and commodities. But trade and services is rapidly growing as well. The chart on the left shows how global services trade has been increasing over the past two decades. The chart on the right shows the relative size components of services trade, including things such as travel, business services, transport, telecommunications, and so forth. The blue line at the top is the total aggregate sum of all services trade. Good to remember that services are increasingly important in international commerce. This final slide is an interesting historical perspective on how trade has evolved over time using an economic center of gravity model. Economic center of gravity marks a point that is equidistant from all economic activity on Earth. It's since the Earth is a sphere, it uses spherical distances. You can see that in 2,000 years ago that the center of gravity was situated in Middle Asia and did not change very much for the next almost 2,000 years. But starting in about 1820, and that's about the start of the industrial revolution, it moved very rapidly to the Northwest. This is because of the industrial revolution and the growth of Europe as a trading center as well as North America. After the beginning of the 20th century, it moved more slowly to the mid-century. After World War II, at which point it started to move very rapidly or has moved very rapidly back to the Southeast due to the rise of economies in India and Southeast Asia and China. It expects that in years ahead, it will continue in a Southeasterly path as these economies continue to grow. In summary, long distance trade is as old as human history. As long as there's been humans, there's been trade. Global trade across and between continents has occurred throughout that history. For example, the ancient hill Silk Road that we discussed. Global trade has been growing exponentially since about 1950. Further, this pattern continues into the future remains to be seen exponentials never go on forever. But we can all hope that trade growth continues to expand. Global services trade is rapidly increasing and it's important to remember the importance of services trade now and in the future as a component of international trade. Trade patterns are changing as economies of underdeveloped countries continue to grow, and that pattern can only continue as those countries develop. I hope that this brief background provides a historical foundation for the international trading patterns we see today and for our further discussions on international business. See you soon.
