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most important functions of the US government was to create a single-currency
open trading block, and this strategy of open trading blocks has been replicated to
some extent via the North American Free Trade Agreement (NAFTA) and the
European Union (EU).
In the twenty-first century, the World Trade Organization (WTO) creates a
framework for open trade between nations, and this framework has encouraged
ever-increasing globalization and trade. The modern international trade system was
engineered by Europe, and then especially the USA, following World War 1 and 2.
The primary motivation for this liberalization of international trade was the
promotion of international peace and security by engineering global prosperity and
economic interdependency. You are less likely to go to war with a country when
their economy is tightly integrated with your own and when there is a high level of
communication, travel, and cultural exchange between the countries.
The US Dollar and the U.S. Federal Reserve System are central to the international trade regime because most international trade is priced in US Dollars, even
trade between countries outside of North America and Europe. This U.S. central
bank, therefore, remains the key financial institution for trade and for economic
stability worldwide, because it sets the supply and price of the Dollar. The internet
has become the key cultural and communication institution for trade and globalization. The internet was founded by and is partly controlled by the US government
and by US companies, but the internet is not a strictly national institution.
We will explore international laws in greater detail in Chap. 6, including how
they affect trade issues. In Chap. 8, we will examine laws and policies in the USA,
and note how they affect domestic and international trade. Finally, it is important to
restate that food, energy, and water systems impact many things that do not trade in
marketplaces. These include ecosystem functions (see Chap. 9), air and water
quality, recreational access, climate, and other phenomena. Nonmarket valuation
was introduced in Sect. 5.2.3 and is revisited in Chap. 9.
In the following sections, we will briefly review some conceptual fundamentals
of trade, then we will discuss the specifics of trade in food, energy, and water, along
with “virtual” trade, trade regulations, and the role of trade in the FEW Nexus
framing. In the coming sections of this chapter, we will explore how these factors
and others that impact trade in food, energy, and water separately and together. We
will introduce some international policies and organizations important to FEW
trading in this chapter.
7.2 Rationale for Trade
There are many reasons why trade occurs between two locations. The most common
reason is that one location has some kind of comparative advantage in the production of a product, which allows it to provide that product for sale/trade at a lower cost
than another location. For trade to occur, the comparative advantage must be sufficient
to overcome both transportation costs and any barriers to trade like a tariff.
P. Saundry and B. L. Ruddell
most important functions of the US government was to create a single-currency
open trading block, and this strategy of open trading blocks has been replicated to
some extent via the North American Free Trade Agreement (NAFTA) and the
European Union (EU).
In the twenty-first century, the World Trade Organization (WTO) creates a
framework for open trade between nations, and this framework has encouraged
ever-increasing globalization and trade. The modern international trade system was
engineered by Europe, and then especially the USA, following World War 1 and 2.
The primary motivation for this liberalization of international trade was the
promotion of international peace and security by engineering global prosperity and
economic interdependency. You are less likely to go to war with a country when
their economy is tightly integrated with your own and when there is a high level of
communication, travel, and cultural exchange between the countries.
The US Dollar and the U.S. Federal Reserve System are central to the international trade regime because most international trade is priced in US Dollars, even
trade between countries outside of North America and Europe. This U.S. central
bank, therefore, remains the key financial institution for trade and for economic
stability worldwide, because it sets the supply and price of the Dollar. The internet
has become the key cultural and communication institution for trade and globalization. The internet was founded by and is partly controlled by the US government
and by US companies, but the internet is not a strictly national institution.
We will explore international laws in greater detail in Chap. 6, including how
they affect trade issues. In Chap. 8, we will examine laws and policies in the USA,
and note how they affect domestic and international trade. Finally, it is important to
restate that food, energy, and water systems impact many things that do not trade in
marketplaces. These include ecosystem functions (see Chap. 9), air and water
quality, recreational access, climate, and other phenomena. Nonmarket valuation
was introduced in Sect. 5.2.3 and is revisited in Chap. 9.
In the following sections, we will briefly review some conceptual fundamentals
of trade, then we will discuss the specifics of trade in food, energy, and water, along
with “virtual” trade, trade regulations, and the role of trade in the FEW Nexus
framing. In the coming sections of this chapter, we will explore how these factors
and others that impact trade in food, energy, and water separately and together. We
will introduce some international policies and organizations important to FEW
trading in this chapter.
7.2 Rationale for Trade
There are many reasons why trade occurs between two locations. The most common
reason is that one location has some kind of comparative advantage in the production of a product, which allows it to provide that product for sale/trade at a lower cost
than another location. For trade to occur, the comparative advantage must be sufficient
to overcome both transportation costs and any barriers to trade like a tariff.
P. Saundry and B. L. Ruddell