Comparison and Contrast of Global Trade Flows

Trade Flows

Compare and Contrast the International Trade Flows

Introduction

Multiple factors determine international trade flows; among them are demand, supply, trade costs, cultural connections, and government policies. The influences of these factors vary based on the groupings that different nations have. For EU grouping, the principal objective is the promotion and facilitation of cooperation among the territorial members. EU members like France and Germany join the grouping with similar objectives of expanding their economic performance, such as enhancing imports and exports.

For France, major exports from 2010 to 2018 have been to Germany with a value of US$ 82,989 million, representing a 16.22 percent partner share. The imports were equally from Germany, worth US$ 103,434 million, and 17.26 percent partner share. The major export for France between the years was Aircraft worth US$ 35,831,627.11 million, with a significant portion going to Germany and the United States. The major imports included petroleum and bituminous oil products worth US$ 35,319,187.35 million, with more than 20 percent originating from Saudi Arabia. Graphically, imports and exports for France can be represented as below.

Figure 1 (WITS, n.d)

For Germany, major exports from 2010 to 2018 have been to France with a value of US$ 118,331 million, representing a 9.33 percent partner share. The imports were from China worth US$ 103,800 million, and 9.79 percent partner share. The major export for Germany between the years were automobiles worth US$ 44,860,010.53 million, with a significant portion going to the United States. The major imports included petroleum and bituminous oil products worth US$ 52,603,077.21 million, mainly from Norway, Russia, and the United Kingdom. Graphically, imports and exports for Germany can be represented as below.

Figure 2 (WITS, n.d)

Trade patterns for France

Most of the economic operations in France through the spheres of international trade happen with the European Union (WEDC, 2018). In particular, the growth in imports and exports within these regions has been accelerated by the liberalization emanating from European integration. The economic theory of free trade, unlike mercantilism that imposes restrictions to promote domestic trade. France enjoys relaxed restrictions within the EU to increase its imports and exports. The average increase in exports to Germany has been due to the increased demand for aircraft and other aeronautics products and the European Commission's policies that monitor developments among EU states. Through these policies, France enjoys 50 percent (2015 report) of its GDP from external engagements that include exports (WITS, n.d). This figure was significantly high compared to the gains through incoming investments. France imports energy in the form of petroleum products that enable it to enhance its production processes (WITS, n.d). The result is economic growth that is conspicuous in various ways. As per the 2014 report, 22 percent of France's GDP resulted from the contribution of the foreign markets. The average international orientation in 2014 was at 24 percent (WITS, n.d).

In analyzing the exports, it is essential to evaluate value addition which constitutes a significant portion of France's exports. Chemicals and related products and transport equipment benefit from the value-addition, hence broadening their demand among the EU nations (Meunier & Nicolaïdis, 2017). In this context, the inward investments are directed to the services sector. Thus, value-addition implies more demand for the supplied products hence responding to the theory of demand and supply. In this theory and response to the technological dynamics with the EU grouping, the demand for even more modern equipment has been on the rise. Unlike before 2010, when the international trade flows for France were limited to financial constraints, crisis, and liquidity declination, that saw a change in market response. The result was a negative export legacy. As per figure 1, the value of imports between 2010 and 2018 was significantly higher than imports implying that despite the large revenue that France gets from exports, it has a considerable reliance on the imports. Here, it is important to distinguish between export expenditure and import expenditure. The disparity between imports and exports does not mean that France has little gains from exports. Instead, some of the imports contribute to the domestic GDP implying and overall economic growth.

Trade patterns for Germany

Germany leads in the exportation of automobiles and other machinery (WITS, n.d). This advantage emanates from skilled labor but faces a major risk due to the challenges of sustaining growth and social welfare concerns. According to figure 2, the average exports for Germany are higher than imports, signifying the EU grouping's importance to Germany's s economy (WITS, n.d). Despite the low responsiveness, there has been an average increase in imports. As per the theory of demand and supply, Germany's demand for foreign products has registered a rise. The products that fall within these spheres are cheaper than domestic products. However, the price and demand aspects are the only determining factors influencing the importing trend (Stirböck, n.d). It is vital to highlight that some products like petroleum products register high demand due to scarcity and not the high domestic prices. Though the graph gives a cumulative analysis of all the imports, the intra-imports within the EU grouping are higher than extra-imports primarily due to price sensitivity. Thus, applying the theory of demand and supply in understanding the difference in intra-imports and extra-import means that price competitiveness is high within the EU grouping, and more opportunities are being exploited (Stirböck, n.d). For external markets, price elasticity is lower due to the nature of products, specifically energy products like petroleum and other bituminous products.

One of the key contributing elements to the smooth economic operations among EU nations is the standardization of currency. Inflation is thus significantly reduced, and countries like Germany and France can trade with minimal currency barriers. Comparing and contrasting the above discussions about Germany and France regarding imports and exports, France has more imports than exports. Germany has more exports compared to its imports. These differences occur because of the nature of the individual domestic markets. Besides, how the EU grouping has contributed to the demand and supply for leading commodities affects the responses. For example, Germany registers higher exports because the automobile industry is huge even to nations outside the EU (Meunier & Nicolaïdis, 2017). For France, the demand for exports is high in developed countries, with only a fraction coming from third world nations. However, there is a distinction in the import or export size as a fraction of the GDP. More imports or exports for one country do not translate to a similar effect in the individual domestic GDP.

In terms of the growth in GDP for Germany and France, there are significant differences. The differences occurred due to the crisis that saw changes in employment trends and per-capita income. Resilience levels changed, and the ability to recover from the shocks was equally varied. Macroeconomic balances occurred in the rates of importation and exportation. The result is a change in economic coordination among the region's two economic giants (Fernández et al., 2019). Convergence was necessary to create a conducive trading environment owing to their contribution to the Euro economy, as illustrated below. This is GDP distribution as of 2018. Figure 3 (Fernández et al., 2019).

According to the above chart, both France and Germany demonstrate a similarity in their vast contribution to the European economy (Fernández et al., 2019). These influences are by far part of the import and export market share that the two countries offer to the region. However, it is worth noting that France witnessed a high employment rate during this phase while Germany registered a decline in the unemployment rate (Fernández et al., 2019). These had effects on the economic performance

Conclusion

Trade diversions are integral to EU trade. Regarding France and Germany and the trade patterns, it is worth noting that the UK leaving the EU on 31 January 2020 has significant effects. First, the UK found the terms within the EU unfavorable, especially on immigration, and it found it fit to regain control of its borders (Edgington, 2020). Brexit does not mean termination of trading or economic cooperation of UK with EU members but introducing new rules of engagement. In the exit deal, there would be no taxes introduced or trading limits between the EU and the UK from 1 January. However, multiple checks were introduced at the borders as safety measures and in line with custom declarations. In particular, new regulations were introduced regarding animal food products from the UK. For example, all uncooked meats, burgers, and sausages must be at -18C before entering the EU (Edgington, 2020). These changes imply that some commodities are more expensive, and their supply will be significantly reduced. Besides, procedures at the port to clear commodities are likely to become more complex. Businesses specializing in banking, accounting, and architecture have lost their access to the EU markets due to increased restrictions, and the professional qualifications are no longer recognized as before. It means that the players will need to comply with the regulations set by each country. Germany-UK and France-UK engagements have been significantly affected. However, the EU and the UK have pledged to evaluate these implications and relax some restrictions (Edgington, 2020). This will allow easier accessibility in the future.