International Trade and Economic Growth .
• International trade, international investment and immigration have all grown rapidly over the pure 200 years. .
• Trade often requires supporting investments in distribution and marketing facilities. Improved transportation and communications permit multinational firms to spread production according to each country's comparative of advantage. Thus, many foreign investments increase imports and exports. People frequently accompany trade and investment flows. y International trade and international investment are two main elements of the growing interdependence of the world's economics commonly referred to as globalization. .
• In 1820, exports as a % of total national output grew only 1% of the total value of world output. By 1870, the advent of railroads and steamships, and reduction of tariffs and other trade restrictions by most of the world's nations, had increased trade to about 5% of the world's output. By 1929, about 9% of the world's GDP was exported. The Great Depression and the sharp increase in protectionist trade policies dunning the 1930s, not to mention WWII, had reduced exports to less than 7% of world GDP by 1950. Since 1950, world trade as a proportion of world output bas grown rapidly again. Between 1950 and 1992, world GDP increased about fivefold while exports increased tenfold. Exports approached 14% of world GDP by 1992. .
• Statistical evidence strongly confirms that there is a strong positive relationship between international trade and economic growth. Also, the evidence points to a bidirectional relationship between growth and international trade.
2. Theories Relating Trades and Growth.
2.1 Internally-generated growth hypothesis.
• Jung and Marshall (1985) claim that output growth causes export growth. The growth of the economy many precede trade growth. .
• Some flourishing industries can be achieved from the accumulation of human capital, cumulative production experience, technology transfer from abroad through licensing or direct investment, or physical capital accumulation.