Geographic Aspects of International Trade Research Paper

In order to understand the nature, evolution, and significance of international trade over time, geographers analyze specific attributes of trade flows. These characteristics of trade are usually defined as the direction of trade, which refers to the origins and destinations of trade; the composition of trade, which describes the specific goods and services being transferred; the magnitude or level of trade, which pertains to the value and/or volume of trade; and the means whereby goods and services are conveyed or transmitted, which may refer to specific trade routes or to competing modes of transportation and communication. The remaining sections describe the intellectual context of the geographers’ interest in trade, and portray the changing emphases geographers have given to the study of international trade over the past several decades.

2. Geographers’ Inherent Interest In International Trade

Geographers are interested in the various characteristics of international trade because they reflect the interrelationships that exist between local, regional, and national space-economies and the world economy. Examining the dynamics of trade enables geographers to forecast the interrelationships that exist between world trade patterns and global competitiveness, the internationalization and changing spatial structure of economic activities, global–local relationships, corporate strategy and government policymaking, and economic growth and development strategies.

More specifically, the intellectual context of the geographer’s interest in international trade is based upon a set of traditional themes and characteristics of spatial systems that can be described as the ‘geographical aspects’ or ‘geographies’ of international trade. These core spatial concepts are places (e.g., cities, regions, and countries); locations in space (e.g., the absolute and relative locations of producers and consumers); distributions (e.g., spatial patterns of human activities, such as the international locations of manufacturing and agricultural production); spatial interactions (i.e., the movements and interconnections among places across space and over time); scales of resolution (i.e., units of observation, which may refer to individuals, corporations, or national governments); change over time (i.e., spatial and nonspatial outcomes of human behavior); regions (i.e., areas at varying spatial scales, such as regional trade blocs, that have common geographic characteristics and that can be utilized to examine the relationships between spatial processes and spatial patterns over time); and potentially constraining factors, such as the distance between buyers and sellers, or international boundaries, which may contribute to the differentiating characteristics of places, and which may increase the transactional costs of spatial interaction.

Examples of the questions that geographers ask about the attributes of international trade, which are designed to provide an understanding of the ‘geographies’ of trade, include the following: (a) To what extent does the distance, as measured by transportation and other transactional costs, between consumers and producers in different countries impact the direction and magnitude of international trade? (b) In what ways has the emergence of strong regional trading blocs and international institutions within the world economy affected the direction, composition, and magnitude of international trade in goods and services among nation-states? (c) What is the relationship between the magnitude and composition of a region’s international trade and its long-term economic growth and development prospects? (d) As the predominant focus of global trading activities has shifted from the Atlantic to the Pacific, what changes have taken place, or may be anticipated, in the location and spatial distribution of economic activities at the local level within the countries of the North American Free Trade Association? (e) In what specific ways have globalization and the processes of internationalization changed the competitive relationships among metropolitan areas in the world, and how have these dynamics affected the direction, composition, and magnitude of international trade generated by these urban areas? (f ) What is the relationship between shifts in the location and concentration of industrial production from the industrialized economies of the world to the newly emerging countries and the changing composition and growing importance of intra-firm and intra-industry trade? Over the years, questions such as these have guided geographers in their efforts to investigate the geographical aspects of international trade. In the following section, an overview of the legacy of these efforts is set forth.

3. Evolution And Diversity Of Research By Geographers

The history of research on international trade by geographers since the 1970s or so has progressed from a period when little or no interest has been visible to one that during the decade of the 1990s has been marked by heightened and redirected activity by an increasing number of researchers. In general terms, this legacy has emphasized two approaches. Prior to the early 1990s, most of the research has been focused upon describing various individual attributes of the international trade system, with little emphasis upon developing an integrated, theoretical body of knowledge. In contrast, more recent research has been well grounded in theory and focused upon the geographies of international trade at different spatial scales.

3.1 Early Perspectives

Prior to the late 1980s, most of the research on the geographical aspects of international trade can be characterized as infrequent and generally descriptive in nature, with an emphasis upon commodity movements between nation-states (see McConnell 1970, 1986 for reviews). Among the investigations carried out by geographers during this early period are studies of the development of international ports, overseas trading routes, and econometric models designed to explain the direction and magnitude of country-to-country trade flows. These models attributed the spatial patterns of international trade to variations in levels of gross national product, population size, distances between countries, and so-called trading preferences, which were usually based upon the membership of individual countries, in particular trading blocs.

With few exceptions, therefore, most of the pre- 1990 studies are focused upon trade as country-to- country commodity flows, with little attention given to the evolving theory of international trade that was being advanced by economists and researchers in international business schools. As noted by Johnston (1989, p. 400), ‘ … the explanatory content [of these studies] is weak; they can tell us what the world is like, but not why it is like that.’ Moreover, little recognition is given to the importance of corporate-level decision making in efforts to explain the movement of goods and services across international frontiers. Finally, most of the research during this period pays little attention to the rapidly changing global economy and the interrelationships between such dynamics and the geographies of subnational places and space.

3.2 Recent Investigations

Beginning in the early 1990s, geographers have begun to intensify their interests in international trade and have been approaching this research utilizing two potentially interrelated perspectives, which are differentiated primarily by their spatial scales. One approach examines the international trade system from a macro perspective, focusing upon the flow of goods and services among nation-states. In contrast, a second area of research views international trade from a micro perspective, and examines the relationships and interdependencies between the dynamics of the global economy and subnational economies. In both of these approaches, however, the empirical research is strongly grounded in the evolving theory of international trade. The principal characteristics and representative studies of each of these two bodies of research are presented later.

The macro-oriented studies examine the changing spatial structure of the global trading system by emphasizing the decisions and activities of nation-states, groups of nations allied within regional trading blocs, or countries at different stages of economic and industrial development. Most of this research is focused upon the relative importance and consequences of the regional trading blocs that have emerged since the 1940s in North America, Europe, and Asia (Michalak and Gibb 1997); the formulation of econometric models that are designed to account for statistical variations in the patterns of country-tocountry trade flows (O’Loughlin and Anselin 1996); and the role of international trade, and particularly the role of government trade policies, in advancing the economic growth and development of nation-states (Gwynne 1966, Poon 1994).

An example of this research is the work by Poon and Pandit (1996), which questions the suitability of the nation-state as the relevant spatial scale for analyzing the international trade system. Following a detailed statistical analysis of inter and intrabloc trade in 1970 and 1990, the authors identify two regional hierarchies that are emerging in the spatial structure of world trade: a Pan-Eurasian region state, which consists of Europe, the former USSR, and Africa; and a Pan-Pacific trade region comprising Asia and North and South America. Contrary to expectations, they find that trade is increasing between these two region states, which supports the premise of the new trade theory that scale economies and large, efficient markets are the major forces underlying the existing international economic system. Moreover, rather than moving toward a more closed, protectionist trade environment, which has been suggested by others, these emerging region states are outward looking spatial entities that are fostering a more open, global trading environment.

In contrast to the macrobased analyses, the micro-oriented investigations are typically designed to explore the interrelationships that exist between the dynamics of the global trading environment and subnational space economies. Particular attention has been focused upon states, regions, technology districts, metropolitan areas, and industry sectors within particular countries. The underlying assumption of this perspective is that the global and local space economies are intertwined, with domestic markets becoming increasingly internationalized and affected by forces beyond their national borders. At the same time, however, the individuality and uniqueness of specific sub-national places contribute in important ways to the international competitive advantages of their local business establishments and to the orientation, composition, and magnitude of the international trade that is conducted. Given the increased importance of international trade to local economies, it is not surprising that politicians and business leaders are interested in ways in which this segment of the local economy can be enhanced. Hence, many of the micro-oriented studies by geographers have raised normative questions about trade policy and tradepromotion efforts under the constraints of globalization.

Several studies are representative of the micro-level emphasis. Research by Erickson (1989) and Leichenko and Coulson (1999) explores the relationship between the industrial growth of states within the US and changes in the value of the foreign export shipments and direct export employment of these states. The more recent study tests a basis tenet of the new international trade theory that a bidirectional causal relationship exists between exports and regional economic growth at the state level. In other words, the model forecasts that a strong regional economy promotes exports, and exports, in turn, promote the regional economy. The theory also postulates that the growth of certain scale-sensitive industry sectors will be more strongly tied to export growth than will others. The study confirms the complex relationship that exists between state industry growth and exporting, and finds that the relationship is indeed sector dependent; in other words, some sectors, such as electronics, chemicals, instruments, paper, and wood products are good candidates for export promotion programs, while other sectors are less likely to respond favorably. In short, this study contributes to the theoretical literature on international trade and regional growth, and, at the same time, endeavors to provide practical guidelines to local government policymakers regarding the relationship between trade and industry policies.

Another example of this more recent research is a study of the impacts of intensified international trade on regions and metropolitan areas in the US (Noponen et al. 1993). The authors examine how the forces of international trade have shaped the changing location and geographic concentration of various industries in the USA, and how this geography has impacted the economic wellbeing of people living in regions throughout the country. By investigating the recent history of the steel, auto, insurance, machine tool, shipping, and pharmaceutical industries in the USA, the authors conclude that the size and location of these industrial sectors are not the result of natural comparative advantages or domestic cost differentials, as theory would suggest. Instead, they are the result of the US government’s free trade policies and similar strategies in other nation-states. The study also concludes that the economic fortunes of places within the country are closely tied to the worldwide system of trade agreements, and that the US government has played a major role in developing and sustaining industrial leadership and international competitive advantage in these key industry sectors.

Finally, two additional pieces of research are representative of research that is designed to demonstrate that despite the forces of globalization and internationalization operating in the world today, subnational places and spaces continue to possess enormous power in shaping not only the geographies of the domestic space economy, but also the international economic system. Storper (1997) makes the case that regions within nation-states continue to play a key role in the composition of international trade. Focusing attention upon production systems that are organized to carry out continuous product innovations, such as the production of scientific instruments and aircrafts, the author argues that such systems are located in highly concentrated and distinctive sub-national regions—agglomerations that he labels as ‘technology districts.’ The wealth of human and resource assets of these regions creates specific advantages that enable local business establishments to compete successfully in the international marketplace.

A similar argument about the relative advantages of local space economies is advanced by Clark and O’Connor (1997). The authors examine the global operations of the financial services system and conclude that the geography of specific places shapes these global markets. The power of ‘local’ is attributed to the informational content of financial markets that is embedded in the local markets. In particular, well-structured international financial systems are dependent upon locally specific information networks of producers and the monitoring of firms’ financial and investment performances. In other words, the effect of geography in the trade of financial services is its impact upon the production and content of information at the local level. Thus, the geographic aspects of place and location have a direct impact upon the international operations of this particular service sector.

4. Epilogue

The recent emphasis by geographers on research that is designed to advance theory-building and to examine further the interrelationships that exist between the dynamics of the global economy and national and subnational space economies is encouraging. By focusing upon place and space at different spatial and temporal scales, and by recognizing the interdependence of geographic scales, geographers are in a favorable position to advance our understanding of the processes that underlie the geographic aspects of international trade and to forecast more accurately the impacts these processes are likely to have on national and regional economies at different spatial scales.

Future research by geographers on the geographic aspects of international trade may be expected to explore the six questions put forth earlier as well as the following concerns: (a) Researchers are just beginning to investigate the dynamics of international trade in services. Given the increased importance of this sector within the global economy, more research is needed to understand the influence trade in services is having upon places and space economies. (b) In addition, the interdependence of spatial scales is a two-way process: the geographies of places are outcomes of the diversity of processes, and yet these places are part of the processes themselves. For example, economic and political processes operate across spatial scales and cannot be fully understood when looking at a particular scale in isolation. Therefore, more research is needed to understand how these processes are related to international trade and how they interact across geographic scales. (c) Attention should also be given to the steps that can be taken by local places to strengthen and exploit their local assets and relative economic and political power in the global system. This seems especially important in the coming years for metropolitan areas, which are increasingly the primary actors in the global trading environment.

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