Introduction
The impact of international trade on emerging economies is discussed globally by modern economists. Emerging economies are the countries that are developing at rapid rates and have the foundations of a market economy. They have the potential to be developed markets, but they lack internal private capital and it causes the slow development of a capital market. They can be characterized by relatively big amounts of foreign investments in a structure of capital funds. Market infrastructure is not yet developed, including underdeveloped financial services and informational opacity, lack a set of investment tools compared to developed countries. Many financial institutions model their portfolio investments according to a set of formal standards. There are additional possibilities for the involvement of foreign capital for emerging economies. An emerging economy must have an effective economic structure with a satisfactory level of international competitiveness. A successful political economy is dependent on macroeconomic stability. A relatively low level of inflation is important, as it leads to stability of currency exchange rates because it is easier for corporations to make long-term investments.
Main body
International trade is an exchange of products and services between national economies, connected with a general internationalization of economics and intensification of the international division of labor. Advantages of international trade include an increase in the intensity of manufacturing and industrial development. Opportunities for mass production often arise for countries that participate in international trade. Export of capital is important for the development of international trade. Foreign capital used to be invested mostly in developed countries, however recently it has become popular to invest in developed markets. Foreign investments are required when an emerging economy has reached a point at which it cannot develop any further. Nowadays emerging economies of India, China, and Eastern Europe are important for international trade, and they change the whole structure of a global economy. Eastern Europe, India, and China have shown exponential growth during the last few years. It is dangerous to invest in emerging economies; nevertheless, investors are interested in Eastern Europe. Therefore, such emerging economies as Poland and the Czech Republic are expected to see huge growth in the future because they are not too dependent on foreign capital. Poland’s top exports in 2014 include $27B worth of machines, engines, and pumps, $25B worth of electronic equipment, and $22B worth of vehicles (Workman, 2015c). Russia’s top exports in 2014 include $288B worth of oil, $20B worth of iron and steel, and $11B worth of gems, precious metals, and coins (Workman, 2015d). India, one of the biggest emerging economies, currently has a huge budget deficit. However, it actively develops the tourism sector, and it is gaining momentum as an exporter of software and services. India’s top exports in 2014 include $40B worth of other petroleum oils, $22B worth of diamonds, and $19B worth of light petroleum oils in 2014 (Workman, 2015b). On the other hand, China shows the most rapid economic growth compared to other emerging economies because of cautious financial policy, a budget surplus, and growing domestic demand, even though it is often criticized for the low exchange rate of their currency. China’s top exports in 2014 include $571B worth of electronic equipment, $400B worth of machines, engines, and pumps, and $93B worth of furniture, lighting, and signs (Workman, 2015a). Additionally, China has helped other countries during a global economic crisis, because of its resilience. Kose (2011) states that “more financially integrated economies are able to attract relatively large foreign direct investment flows, which have the potential to generate productivity spillovers” (p. 16). It means that local productivity may escalate with increased foreign investments. Therefore, emerging economies have a huge impact on international trade because they help to form new trade patterns between countries.
The emerging economy must become even less dependent on external help, and the size of debts should be reduced. Additionally, an increase in economic growth is possible with the support of foreign countries. Emerging economies are prone to be affected by both internal and external factors. Moreover, demand is not as massive as it used to be. Therefore, it will be hard to keep the pace of the development of the economies. Nowadays the main risk for emerging economies is a potentially negative connection between the level of activity in the real sector and the economic environment. It may be hard to accomplish an economic balance considering an increase in interest rates in the United States. Geopolitical tensions are significant risk factors for economic development. Nevertheless, economic influence at the sub-regional level, caused by a conflict and sanctions may lead to even slower growth.
Tihanyi, Banalieva, Devinney, and Pedersen (2015) state that “future research can explore how the timing of institutional development affects the internalization, governance, or innovative strategies of emerging economy firms” (p. 59). This means that currently, available data is not enough to accurately predict the development of emerging markets in the future. Indonesia, Bangladesh, Tanzania, Philippines, Colombia, Ethiopia, Kenya, Sri Lanka, and Zambia are the most recently discovered emerging markets. Their advantage is that they are less reliant on trade with advanced economies. An increase in the growth of the economy of Brazil, India, Turkey, and South Africa and a slight decrease in the economic growth of China is predicted. Therefore, there are still significant risks of an even further decrease in economic growth and a long period of slight economic growth in China. However, the impact of China on international trade cannot be overlooked because it is one of the biggest exporters and one of the largest importers. An economic model of China is also used in Latin America, Africa, and other Asian countries. According to analytics, China should double its GDP by 2030 (Smialek, 2015). Additionally, it is expected that India will overtake the spot of China because its GDP growth is supposed to accelerate in the next 50 years. Meanwhile, the future is not that bright for Eastern Europe. A crisis in Ukraine and Russian stagnation both have led to serious economic consequences. Therefore, Ukrainian and Russian economies are expected to grow really slow. And this situation is not expected to stabilize anytime soon. However, a more active economic development of Hungary, Poland, and the Czech Republic are expected in the next 50 years because of an increase in industrial production and overall economic growth, which will have an impact on international trade. Nonetheless, all of these emerging economies have huge problems, such as a budget deficit, disproportional inflation, and financial stability risks.
Conclusion
In conclusion, some countries with emerging economies will have huge economic growth in the future and increasingly effective assets, however currently biggest ones may face huge losses in financial markets. It is caused by changes in the economic environment, which is not as stable as expected. The impact of emerging economies of international trade cannot be overlooked because they are becoming leading exporters. Consequently, it can be stated that international trade and emerging economies are interconnected. Therefore, it is important to cooperate at the international level to reduce risks faced by emerging economies. Under the current circumstances, the management of international financial institutions should be reformed. Overall, the elimination of current issues should lead to financial stabilization and an increase in the overall development of the global economy.
References
Kose, M. A. (2011). Emerging markets: resilience and growth amid global turmoil. Washington, D.C.: Brookings Institution Press.
Smialek, J. (2015). These will be the world’s 20 largest economies in 2030. Web.
Tihanyi, L., Banalieva, E. R., Devinney T. M., & T. Pedersen (2015). Emerging economies and multinational enterprises. Bingley, United Kingdom: Emerald.
Workman, D. (2015a). China’s Top 10 Exports. Web.
Workman, D. (2015b). Highest Value Indian Export Products.Web.
Workman, D. (2015c). Poland’s Top 10 Exports. Web.
Workman, D. (2015d). Russia’s Top 10 Exports. Web.