Global Investing

CHAPTER 3Global Trade

________________

Advancements in Global Shipping

As consumers in today's global economy, we cannot help but compete with others from around the world when we wish to travel or purchase a good. The ease with which goods (and people) can be transported overseas means that we are all competing to maintain our relative purchasing power at a global level. You may find it difficult to buy the house of your dreams if purchasers from other regions have benefited from higher levels of wealth creation and are able to bid up prices beyond your ability to pay. Whether you realize it or not, you live in a global economy. The same is true for operating a business. Unless government regulations prevent new entrants from entering your market, a bigger, stronger foreign business can come along and threaten your company's existence. The more profitable your business is and the easier it is to enter your market, the greater the threat from potential competitors, especially if the competitor benefits from a lower cost structure.

As the global economy has grown, the trade in goods and services between countries has expanded immensely. Siegel notes that “[f]rom the 1950s to the latest global economic crisis, the growth rate of international trade was almost consistently twice that of economic activity as a whole.”¹ Most of the goods traded internationally are transported around the world via a combination of truck, rail, air freight, and marine shipping containers. On average, ...