The local family businesses that once dominated the retail trade no longer do so, observe Patrick Love and Ralph Lattimore in ‘ OECD Insights: International Trade ’ ( >www.academicfoundation.com ). “The disappearance of the small family business through mergers, being bought out or bankruptcy, and their replacement by larger firms, is known as market concentration. This can have positive and negative effects for consumers.”
The typical adverse effect of market concentration can be high prices for consumers and low margins for suppliers. On the positive side, however, consumers can benefit from international trade, the authors argue. “Prices of goods that are the most open to international trade have fallen to the point that many of them are now so cheap that it would be more expensive to repair them than to replace them when they break. Electronics items probably come to mind, but some of the most radical changes in recent years concern clothing.”
Incredibly international
Low-cost versions of the expensive clothes seen in magazines are available within about a month of the first pictures appearing, note Love and Lattimore. This is an incredible achievement, they feel. Because: “Within the space of a few weeks, buyers have passed their orders; designers have produced the models; cloth has been made, bought and sent to the factories; the patterns have been drawn; programmers have written the code that controls the machines; workers have manufactured the items, packed and shipped them; agents have taken care of customs and other formalities; advertising agencies and the media have devised, produced and broadcast campaigns; and salespeople have started selling the new fashion.”
It is not that international trade is the only reason for the fall in the price of many things we buy, the authors clarify. Advances in production and other technologies are vital too, but trade joins together all the different stages of the process; it welds the links of the value chain, they explain.
In the opinion of Love and Lattimore, donors and their partners in charge of organising ‘aid for trade’ could learn from the successes and failures of efforts to join the international supply chains of large retailers, and channel assistance into easing bottlenecks related to transport, for example, and through technical cooperation related to complying with new standards.
Helpful insights.
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