International trade affecting our state is still growing, perhaps faster than ever, driven by turn
of the century expansion of international trade around the globe.
International trade in Washington, the U.S. and the world has grown dramatically over the past 20 years. National and regional economies are now linked around the world; food is shared between different climates and cultures, manufacturers have factories, suppliers and customers in multiple countries, and consumers purchase goods from all over the world by just walking to their local supermarket.
Over the last five decades, world economic integration has occurred at a rapid pace. Since 1950, world trade has almost doubled the average annual growth rate of world Gross Domestic Product (GDP) (World Bank, 2003).[1] This trend has been reinforced by long-term trends toward freer trade and reduced protectionism by many leading national economies, including the United States. As the world’s largest economy and the largest participant in international trade, the U.S. is critically linked to these trends.
The two graphs below show the growth of U.S. and Washington State international trade since 1980.
International Trade Entering and Leaving Washington State
Nominal Dollars in Billions
International Trade Entering and Leaving the United States
Nominal Dollars in Billions
The value of total U.S. international trade grew by 99 percent from 1980 to 2002, at an average annual growth rate of more than three percent. Over the same period, the value of total international trade passing through
Washington State also grew, although slightly less at 60 percent and an average annual growth rate of
almost three percent.[3]
In real 1980 dollars, U.S. trade grew out of a slight downturn in the early 1980s, from $387 billion in 1983 to a high of over one trillion dollars in the year 2000. The most rapid rate of growth during this period was in the mid to late 1990s, with imports exceeding the growth of exports. Trade levels declined after the 2000 peak, declining to
$936 billion in 2002, with exports decreasing slightly more than imports.
In 2001, the value of total U.S. international merchandise trade declined nearly four- percent from the record reached in 2000, the largest annual decrease since 1990. The decline in 2001 was due, in part, to the weakness of global economic activity and the effect of the September 11, 2001 terrorist attacks (USDOT BTS, 2003).
As shown in the graph below, Washington State has experienced greater fluctuations in international trade growth than the U.S. as a whole.
Annual Growth in the Volume of International Trade
Adjusted for Inflation
Similar to other west coast states, international trade flows through Washington State grew the most during the late 1980s and early 1990s (exceeding the growth rate of U.S. trade during this period). Washington trade flows
peaked in 1993 at more than $52 billion. Following a sharp decline in 1994, international trade growth picked up again in 1996, reaching $56 billion in 1998 before leveling off and decreasing to a total of $48 billion in 2002. Rapidly decreasing imports in 2001 contributed the most to declining trade volumes, with exports remaining fairly stable.
The growth of trade is expected to continue. By the year 2025, the value of international trade moving into and out of the U.S. is expected to reach 37 percent of U.S. gross domestic product. Numerous reports document the expected growth of international trade for both the U.S. and Washington State.
World and U.S. Merchandise Trade as percent of Gross Domestic Product
Note: Forecast for world trade not available.
Source: World Bank, World Development Indicators 1999 and WEFA Forecast, 2000
Source Data: World and US forecast GDP source info.
A recent report by the U.S. Department of Transportation's Burea of Transportation Statistics analyzes the growing impact of international trade on U.S. Transportation Systems.
Since 1980, the growing influence of international trade on the U.S. economy can be demonstrated by how much U.S. international merchandise trade has grown versus the growth in U.S. GDP. Between 1990 and 2001, the ratio of the value of merchandise trade to GDP rose from 13 to 22 percent.
A long-term trend impacting the growth of international trade is the shift of the U.S. economy to a more service-based, as opposed to production-based economy.
The impact of globalization can also be shown by the ratio of U.S. merchandise exports compared to the
production of tradeable goods. In 2000, the ratio of goods exports to goods GDP was 42 percent, up from 15 percent in 1970. The share of goods exports to overall GDP only grew from 5 percent in 1970 to 8 percent in 2000. Economists state that this trend shows that U.S. exports have become more important to domestic production.
Note: Goods GDP is a measure of the production of tradable goods, the higher ratio of export goods to this value shows that more U.S. production is interlinked with exports.
[1] World trade average annual growth rate has been 6 percent and world GDP average annual growth rate has been just under 4 percent.
[2] Real dollars are adjusted to constant 1980 dollars using IPD index.
[3] The average annual growth rate for U.S. international trade, in real dollars, was 3.4 percent and the average annual growth rate for international trade passing through Washington State was 2.6 percent. Without adjusting for inflation, U.S. trade grew by 298 percent and Washington State trade grew by 218 percent from 1980 to 2002.