To start off – some factsUS – Canada trade worth $820 billion (2007) , US-MEXICO TRADE-2006- $342 Billion, CHINA EXPORTS-2007-1.2 trillion of which the breakup is as below.
a. Asia- 46%-Japan-11%
b. Europe-24%-EU- 16%
c. North Ame-21%-US-14%
I was till now of the impression that China’s exports were mainly to America and Europe!!! This left me wondering what drives trade across borders.
The main factors of trade across nations were:
Common Language + 42 %
Common Regional Block + 47 %
Colony/Coloniser + 188 %
Common Currency + 114 %
Common Land Border +125%
The above facts would be true except for perhaps exports between India and Pakistan. Prof. Ghemawat in his book on International Marketing talks about the CAGE Framework to analyse bilateral trade.
C-Cultural, A-Administrative, G-Geographic, E-Economic
There have been multiple cases where organizations successful in their country of origin have failed when they went abroad, Walmart in Germany, Argentina, Brazil from where they eventually pulled out, Disney in Paris, Google in China. It would be interesting to see how Walmart adopts its operations in India though it is only going to manage the backend with Bharti managing the front end.
Different culture, ethnicity, values, language, religion all have an impact on bilateral trade. Geographic differences too have a major role in determining trade relations like physical distance, lack of land border, different time zones, climate etc. One reason for the booming Indian IT industry was the difference in time Zones with US. Another reason that drives trade can be attributed to administrative policies like colonial ties, trade blocks, same currency, political hostility, and policies common and civil. Some internal factors that impact foreign investments and trade are closed economy, lack of membership to international Organizations, weak institutions and corruption in a country. The last reason that impacts bilateral trade is economic, like the rich-poor divide, differences in cost and quality of natural resources, financial resources, human resources, infrastructure, and knowledge. Other macro economic factors like Economic Size and per capita income play a major role too.
