Consumption and global market

Saleh Akram | Published: November 03, 2015 00:00:00 | Updated: November 30, 2024 06:01:00

What David Recardo said 250 years ago still constitutes the basics of international trade. The difference between then and now is that his theory of comparative advantage is becoming increasingly global. To understand the underlying truth of the theory, one has to understand two things: money and market. Â
Money can not buy everything, but still it is valuable. There are people who measure life with money and to them life is meaningless without money. They are called hedonists. They derive limitless pleasure in earning and spending the money. They measure the degree of pleasure with money.
Market is the place where money is transacted. People buy products with money to maximise their satisfaction. According to fundamentalists, if the market is not free and competitive due to some control or restriction, consumer satisfaction can not reach the highest level. Consumer laws are hence framed in various countries to keep the market free and transparent.
Today's local markets are getting merged with global markets. As a result, the products available in local market come from far-off places which means, consumers are local, but producers are global.
Readymade garments of Bangladesh may be cited as an example. Labour intensive production of garments entails high cost in some countries where labour cost is high and eventually these countries meet their demands through imports. This is where theory of comparative cost advantage comes into picture. According to the theory, countries producing a particular commodity at a lower cost will produce the same and countries where production cost is higher, will collect from them.
But duties and taxes imposed by the governments stand between countries intending to export and those intending to import. Despite having comparative advantage, many countries can not sell their products to other countries due to tariff barriers. In addition, the issue of protection for domestic products in a country is preventing countries with comparative advantage from exporting their products.Â Â
There are restrictions on foreign currency use also. Tariff barriers and restriction on foreign currency use impeded the growth of free trade and investment. But the situation is now fast changing. Geographical barriers have almost been removed in last 25 years. Sitting in 1990, nobody could imagine that economies of the world would become one economy in a span of only 25 years.
The USA has provided the African nations free trade opportunity. Meanwhile, world's largest trade bloc, Trans-Pacific Partnership (TPP) comprising of 12 countries including USA, Canada, Mexico, Singapore, Vietnam, Malaysia, Japan, Australia, New Zealand and Brunei has been formed. The trade bloc members will get the opportunity of duty-free, quota-free trade.
Bangladesh is yet to become a member of a large trade bloc and does not enjoy full benefits of international trade which is also a major cause for its not being able to fully utilise its potential.
The world is becoming a unified entity through consumption and market. Information technology is drawing people closer to this end and impediments to production and marketing are fast disappearing. Market is being redefined. Markets created by e-Trade and e-Commerce are not like those described in our text books.
saleh.akram26@gmail.com