TRADE AND NATIONAL OUTPUT Together, the WTO agreements and regional pacts have boosted world trade and cross-border investment significantly. Trade theory tells us that openness to trade helps a nation produce a greater amount of output. Map 1. 1 illustrates that growth in national output over a recent 10-year period has been significantly positive. Economic growth has been greater in nations that have recently become more open to trade, such as China, India, and Russia, than it has been in many other countries . Much of South America is also growing rapidly, whereas Africa’s experience is mixed. This relation between trade and output has persisted despite a drop in nations’ economic growth rates due to the global fi nancial crises of recent years.

Let’s take a moment in our discussion to define a few terms that we will encounter time and again throughout this book. Gross domestic product (GDP) is the value of all goods and ser- vices produced by a domestic economy over a one-year period. GDP excludes a nation’s income generated from exports, imports, and the international operations of its companies. We can speak in terms of world GDP when we sum all individual nations’ GDP figures. GDP is a somewhat narrower figure than gross national product (GNP)-the value of aII goods and services pro- duced by a country’s domestic and international activities over a one-year period. A country’s GDP or GNP per capita is simply its GDP or GNP divided by its population.

World Trade Organization (WTO) International organization that enforces the rules of international trade.

gross domestic product (GDP) Value of all goods and services produced by a domestic economy over a one-year period.

gross national product (GNP) Value of all goods and services produced by a country’s domestic and international activities over a one-year period.

GDP or GNP per capita Nation’s GDP or GNP divided by its population.

12 PART 1 • GLOBAL BUSINESS ENVIRONMENT

MAP I. I Growth in National Output

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PACIFIC

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Ll;THUANIA RUSSIA

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SERBIA AND MON~NEGRO

BULGAR 1 MACEDONIA

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BRAZIL

BOLIVIA

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Average annual GDP growth rate, 1998-2007, (%)

negative • positive • less than -2.5 0 to 1 • -2.5 to 0 • 1 to2 0 no data available 2 to 3 3 to 4

4 to 5

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CHAPTER 1 • GLOBALIZATION 13

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14 PART 1 • GLOBAL BUSINESS ENVIRONMENT

Technological Innovation Although falling barriers to trade and investment encourage globalization, technological innovation is accelerating its pace. Significant advancements in information technology and transporta- tion methods are making it easier, faster, and less costly to move data, goods, and equipment around the world. Let’s examine several innovations that have had a considerable impact on globalization.