Alfonso Llanes, Master Degree in International Development
In order to learn the level of heterogeneity of merchandise trade, its financial aspects and its potential as a driver of international commerce, three general transactional areas can be derived from multidimensional trade complexity.
1. The quality and amount of the traded products, direction of trade, transportation from origin-destination, storing, handling and ports of entry technology and accessibility.
2. Banking, finance, trade facilitation, insurance credit, currency exchanges, futures.
3. Regulations governmental agencies, trade organizations Custom Unions and international treaties.
The volume dimensionality of trade complexity is related to the operational and organizational costs sustained by a firm entering a trade activity, and it is agency in the number of countries where its products are traded.
the quality assurance of trade complexity is linked to the costs of contracting for specific products which need to be screened for quality and insured against the risk of a faulty delivery for the buyer, or the monetary risk of not being paid for the seller
Technology plays an important role in trade complexity deals that have different costs between domestic inputs when compared with foreign ones and developing a way of measuring or gauging the average number of countries from which a specific product is imported or exported.
In order to analyze these dimensions of complexity in its many layers having hundreds of data points the system network must be must placed in an artificial neural network (ANN) and run recursively until minimum cost values converge. There are many software packages in the market today but for a small sample a common spreadsheet program such as Excel will be adequate for an ANN analysis.
Quantity, quality and technology and other supporting layers of trade can be bundled up and reviewed for behavior and correlation in a mix batch of import and export transactions that a firm might engage in its process of production. Many of the trade volume and value today is due to inter-industry trade by manufacturers and assemblers of finished products for domestic or international sale.
The downside of trade however, has always been attributed to a displaced labor force when a country engages in trade. Consumer benefit with better quality products at lower prices in the a domestic economy. A loud sounding solution to worker’s displacement resulting from trade has been retraining of the affected labor force which has been widely accepted by economist and governments intending to participate in global trade. Moreover, educating people with the skills that allow handling complex processes, such as languages, communication, engineering, legal services, and management in the service sector can alleviate some of the dis-functionality in the manufacturing sector from trade. This new focus on service skills is likely to be more effective in fostering a better integration into global value chains.
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