history of international trade research paper

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Theoretical Issues Concerning the History of International Trade and Economic Development

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International trade and economic growth: evidence from a panel ARDL-PMG approach

• Original Paper
• Published: 24 July 2021
• Volume 18 , pages 847–868, ( 2021 )

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• Wajdi Bardi 1 &
• Mohamed Ali Hfaiedh 2  

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The purpose of this work is to study the impact of trade openness on the economic growth of the countries bordering the Mediterranean using a panel of eight countries from 1975 to 2016. We apply ARDL panel which is a technique recently developed. We study the effects of openness to international trade on economic growth while incorporating economic policy variables. The results show that the variables of commercial and financial openness favor economic growth. The free trade agreements that the European Union has signed with certain countries in the Mediterranean basin are designed above all to encourage greater regional economic integration and an increase in their potential growth. Therefore, our findings show that the financial sector is slow to affect economic growth in these countries. This study reveals that human capital and the investment rate support the economic growth of our sample. In addition, we conclude that a process of economic convergence has begun in these countries. A causal analysis was carried out we found an unidirectional causality ranging from economic growth to trade openness.

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Macroeconomic Determinants of Trade Openness: Empirical Investigation of Low, Middle and High-Income Countries

Trade Openness and Economic Growth in Mauritius

Macroeconomic Stability, Openness, and Economic Growth Nexus: an Insight from BRICS Countries

Umer Jeelanie Banday & Ranjan Aneja

The author takes from the model of Grossman and Helpman ( 1991 ), the idea that the technological level in the country of North appreciates at the rate of the research and that that of country of the South depends on an activity of good imitation market.

These two vectors of technology transfer are not, in principle, not far from each other, since foreign investment flows can take the form of imported products.

The size of the two partner countries in terms of population and country size, the distance between the two capital and the fact that they share a common border, are the determinants mentioned by Frankel and Romer ( 1999 ). The latter propose to calculate the geographical component of total trade and to use it as an instrument in growth regressions.

For a broad empirical review of these models, see the article by Rodriguez and Rodrick ( 2000 ).

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Bardi, W., Hfaiedh, M.A. International trade and economic growth: evidence from a panel ARDL-PMG approach. Int Econ Econ Policy 18 , 847–868 (2021). https://doi.org/10.1007/s10368-021-00507-4

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Accepted : 30 June 2021

Published : 24 July 2021

Issue Date : October 2021

DOI : https://doi.org/10.1007/s10368-021-00507-4

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History of Air Transportation and International Trade Research Paper

1920’s- 1940’s: period of unprecedented growth, world war ii and post war period, the 1960’s towards contemporary times, air transportation and international trade, reference list.

Many cultures and civilizations have designed devices that pass through the air, from the primitive projectiles used in ancient battlefields such as stones and spears to more complicated, stylish, and buoyant aerodynamic appliances such as the mechanical pigeon of Archytas, Greece. History is awash with stories of early human flight such as the breathtaking stories of Icarus and the 12 th century winged air flights of Eilmer of Malmesbury (“Aviation,” 2009; Lane, 1986). To put the ball rolling, the developments that man has been able to achieve in air transportation have been informed by desires and inventions such as the 1783 hot air balloon developed by Montgolfier brothers and the more recent Wright Brothers heavier-than-air flight of 1903. This report sets out to critically analyze the history of air transportation and how it has served to revolutionalize international trade.

The fascination and dreams held by man regarding flying was not extinguished upon the demise of the Wright Brothers. On the contrary, man got obsessed with the notion of developing better aircrafts, an idea that has held on from generation to generation to bring us the latest state-of-the-art airplanes. Today, airplanes have evolved into major transportation carriers responsible for delivering humans and shipments from one point to the other (Martins, 2009). Although the journey has been long, the achievements have inarguably made the world to become a global village. International trade has indeed undergone a complete metamorphosis for the better due to the ease of movement of both civilian and cargo traffic.

According to aviation history, the first practical demonstration of air freight was initiated in November 1910 when a cargo of silk was airlifted from Dayton to Columbus, Ohio (Siddiqi, 2007; Martins, 2009). A story appearing in a local daily noted that the air shipment reached its destination much faster than it could have if conventional railroad express had been used to transport the consignment. According to Trani (2005), the first airmail service for the US army was documented in 1916. Nine years from the first practical demonstration of airfreight, the American Railway Express undertook to airlift 1,100 pounds of cargo from Washington D.C. to Chicago using a rehabilitated Handley-Page bomber plane. However, a frozen radiator compelled the freight carrier to terminate its journey prematurely.

The US became successful in airmail transportation in the 1920’s; with passenger and freight transportation following in 1930’s and 1940’s respectively. During the 1920’s, the freight carriers catered for intra-country businesses only, stimulating economic growth due to fast delivery of merchandize to the businesses and shortened time of concluding transactions (Alaz, 2005). According to Trani (2005), the Kelly Act was passed in 1925 to allow private operators conduct business in the air mail service. In 1926, the first Air commerce Act was signed into law by President Coolidge. This particular legislation formalized the budding air transportation in the US by initiating air traffic rules and establishing aids to assist in air navigation. The act also made provisions for airmen certification.

The first known airlines to operate in the US airspace as air freight carriers included TWA, American airlines, United, and Eastern (Martins, 2009). According to Trani (2005), the 1926 legislation by President Coolidge made it possible for other freight carriers, mainly from Latin America, to do business in the US. The carriers that tried their luck in the US airspace included KLM, Pan AM, Varig, and Lufthansa. The first airlines emerged in Europe and the US in the late 1920’s. Between 1927 and 1931, the volume of airfreight increased significantly in quantity and size to reach almost a million pounds, up from a meager 45,859 pounds recorded in 1927 (Martins, 2009; Triani 2005).

The above monumental growth of airfreight in the late 1920’s and early 1930’s coincided with the introduction of the Fokker Trimotor air carrier that had been developed using aluminum and monocoque, and could cruise at an improved speed of 175 Kph. In the 1930’s, the first air traffic control facility in the US was commissioned at Newark, New Jersey to streamline air transport operations (Trani, 2005). On December 23, 1940, United Airlines launched what some historians in the aviation industry believe was the foremost all-cargo service in the country’s airline history. In this historical shipment, United used a Douglas DC-4 aircraft to transport airmail from New York City to Chicago (Siddiqi, 2007).

According to Alaz (2005), the Second World War completely altered the statistical distribution and the quantity of airfreight traffic. During this period, freight gained an upper hand over airmail mainly because of the military activities occasioned by the war. Military cargo needed to be transported to the battlefields. Siddiqi (2007) concurs that airfreight and passenger traffic had indeed remained sidelined at the expense of airmail until early 1940’s. However, the situation changed dramatically in March 14, 1941 when United Airlines, American Air, TWA, and Eastern came together to form Air Cargo, Inc. The mandate given to the new company was to deliver freight, a duty it carried in earnest from December 1941 until the end of WW2. The last regular flight made by Air Cargo was recorded in November 1944 (Siddiqi). Immediately after the war, the airlines that had initially formed Air Cargo started their own independent operations (Taft, 1986). The following table shows the growth of mail and freight traffic in the U.S. during and after the war period.

Comparative growth of mails and freight traffic (million RTV)

The table above clearly reveals how the magnitude of cargo increased during this period. The dynamic growth of airfreight was attributed to increase in tonnages and a sharp increase of the average distances traveled by air (Alaz). This is a good pointer to show that individuals and businesses alike had become responsive to the budding air transportation industry.

Landmark achievements in the air transportation industry took place during this period. In 1938, President Roosevelt inaugurated the Civil Aeronautics Authority (CAA). Between 1939 and 1945, the U.S. developed hundreds of low cost airports around the country for use as training grounds by pilots. According to Trani (2005), massive aircraft development witnessed during this period bore fruits with the introduction of Douglas D-6 aircraft in 1946. The aircraft, which utilized the piston powered engine technology, became the mainstay of commercial aviation as it was able to cruise at 550 Kph with 45-65 passengers aboard. The fact that primary radar systems were developed during this period cannot escape mention. The radar technology heralded an era of efficient and secure air operations due to the aircraft surveillance offered by the device. According to Trani, the first radar equipped aircraft control tower was commissioned in 1945 in Indianapolis, U.S. This was closely followed by the enactment of the Federal Airport Act (FAA) of 1946.

Airlines continued to flourish in the US and other continents such as Europe and Latin America due to increased volumes of airfreight. Indeed, the airfreight business during the 1940’s and 1950’s was lucrative business, occasioning an upsurge of operators – from small plane owners to other seasonal airlines such as Slick Airways and California Eastern. However, large operators such as the Air Cargo group were increasingly getting worried about the small operators’ ability to undermine commercial aviation sector through their unscheduled flights and low rates (Siddiqi, 2007). By 1951, the U.S. commercial aviation carriers made up 61.6% of the total global traffic in passengers. The American carriers also transported 48.5% and 58.1% of the world’s total traffic in freight and mail respectively (Alaz, 2005). In the same year, the British inaugurated their first commercial aircraft – Comet 1.

By early 1950’s, a triple-thronged wrangle sprout up between the small-time operators, the established airlines, and the regulatory board – Civil Aeronautics Board (CAB). The board had been formed in 1939 after the uneventful split of CAA (Trani, 2005). The bone of contention was on how to effectively set the rates for freight transport and handling of contracts. CAB came to the rescue of the small-time operators in August 1945 when it permitted Slick Airlines, United States Airlines, Frying Tiger, and Airnews to operate (Siddiqi, 2007). However, the survival of two of the airlines – US Airlines and Airnews – was short-lived due to a series of incurring huge losses, bankruptcies, and air accidents. Slick Airways and Flying Tiger survived the onslaught of stiff competition propagated by large airlines such American. Indeed, by the late 1940’s, Slick had left an indelible mark on the air transportation industry by becoming the most flourishing all-airfreight operator in the country.

However, Slick’s shine to glory was short-lived due to stiff competition from airlines that offered both passenger service and all-airfreight operations. Combining both services gave some carriers an upper hand since they could effectively lower the costs of transporting cargo without incurring losses (Siddiki, 2007; Alaz, 2005). Unsure about their survival due to the stiff competition, Slick and Flying Tiger came together in 1954 to try and effect a merger. However, structural and labor problems watered down their efforts. Due to the hardships, Slick Airlines continued to operate in an on-and-off environment until it was eventually suspended by CAB in 1965 (Taft, 1986).

Flying Tiger soldiered on, fuelled by its business acumen of diversifying into both armed forces and civilian markets. The airline performed exemplary well to curtail competition from established passenger airlines due to both diversification and favorable CAB Judgments. Due to its sharp business acumen, Frying Tiger signed cooperative agreements with some rail corporations to transport freight on their behalf. By mid-1960s, Frying Tiger had become the biggest air cargo airline in the US, making an annual profit of around $20 million. Despite the promising results achieved by Flying Tiger in the airfreight business, the freight component remained far behind in growth compared to the other components of air traffic. Operators who tried to break the jinx plaguing airfreight business often found themselves incurring massive losses (Siddiqi, 2007). However, major operators such as United Airlines continued to make headlines both in passenger and freight operations. In March 1964, the airline was in the headlines again for pioneering the first non-stop international all-cargo air service.

This was an exciting period for the industry as far as development is concerned. The approach lighting systems, Instrument Landing System, and the Very High Frequency Omni-directional Range and Finding equipment were all conceived in the early 1960’s (Trani, 2005). During the 60’s, Boeing and Douglas developed efficient four-engine, turbojet and piston propelled aircrafts with a cruising speed of 900 Kph and a passenger capacity of 140-165. This definitely stimulated the growth of passenger service in the industry. Most world famous airports were also conceived during this period. Some of the airports include Newark, Washington Dulles, San Francisco, and Chicago International airports. The Concorde, with a cruising speed of 2400 Kph and a passenger capacity of 90-110, was introduced by BAC/Aerospatiale in 1968. This marked the beginning of the supersonic era. Boeing introduced its 747-100 series in 1969.

The airfreight business had its own movers. A young entrepreneur by the name of Fred smith seized the opportunity to develop airfreight business to another level with the establishment of Federal Express in Memphis, Tennessee. He wanted to separate freight traffic from passenger traffic since the two components shared very little in route patterns (Siddiqi, 2007). His decision to create the new outfit was also based on the fact that cargo delivery was being unnecessarily delayed by passenger traffic. Starting its maiden cargo flight in April 1973, the company performed exemplary well to record revenues of $1 billion in 1982. Federal Express acquired another cargo airline – Tiger international – in August 1989 to become the world’s leading full-service all-freight airline. In 1994, the airline changed its operating logo to FedEx. During this period, markets had already been consolidated for both commuter and cargo traffic (Trani, 2005).

Air transportation continued to achieve considerable developments in the two fronts – passenger and cargo. Consolidations continued to take place with the introduction of the mega-carriers in the domestic scene in the late 1980’s, and later internationally in 1990’s (Trani, 2005). Growth in the air transportation industry was further propelled by the European liberalization in 1993. By the late 1990’s Boeing and Airbus had successfully introduced long-range, twin-engine state-of-the-art aircrafts, with a cruising speed of 985 Kph and a carrying capacity of 270 passengers. Global Positioning System (GPS) was introduced in 1993, an innovation that was bound to bring millions of dollars to the operators in savings.

Meanwhile, FedEx had received another competitor in freight business by the name of United Postal Service (UPS). To date, the competitor has been able to maintain an immense presence in the air transport industry, specifically in airfreight and airmail markets. Surprisingly, UPS had started its operations as a bicycle-based delivery service in early 1900’s (Siddiqi, 2007). In 1950’s, UPS diversified its operations to include package delivery to both private and commercial customers. UPS received the license to operate its own airline from the regulating authority – FAA – in 1988. The airline has continued to register impressive results since then. By 2001, it was the ninth largest carrier in the country.

Today, air transport and travel have experienced the most intensive growth in the fundamentally important transport industry. To exemplify the importance of the sector, the scheduled passenger services, for instance, remain critically regulated the world over. Although some relaxation has been observed in a number of countries, the services still remain subject to over 3500 bilateral agreements and regulations (Hubner & Sauve, 2006). Of late, the industry has been overly affected by terrorist infiltrations, especially after the September 2001 attacks. The terror attacks coupled with successive economic recessions, global pandemic outbreaks, and massive increases in fuel prices have caused the growth of air transport to stagnate during the first eight years of this century. However, air transportation remains one of the most preferred modes of transportation the world over. For example, the passenger base in the US has expanded from around 170 million passengers in early 1970’s to a staggering 741 million in 2006. This monumental growth represents an average increase of 4% per year (Bureau of Labor Statistics, 2008).

In terms of influencing international trade, Air transportation can only be equaled to the World Wide Web and the mobile phone. Air transport has completely revolutionalized the international movement of goods and passengers (Hubner & Sauve, 2006). Indeed, to say that air transport is important for international growth would be an understatement; it is a fundamental requisite for international trade. Through air transportation, businessmen were able to get the much needed products within a very short time in the 1950’s. Spare parts and other equipments that could have taken months to transport by train or sea only took a day, possibly two, to reach their destination (OECD & Button, 1997). The rapidity and efficiency to deliver cargo and business travelers over long distances acted as a stimulant to international trade. It is evident that pioneer countries in air freight and passenger travel developed at a much faster rate than others who never seized the opportunity.

According to OECD & Button (1997), “…changes in production, trade, and investment arrangement have significantly increased the need for international communications and the shipment of commodities, thereby providing an impetus to international business travel and the transport of freight by air” (p. 32-33). This clearly reveals that air transportation cannot be separated from international trade. One component must be present for the other to grow. Around 40% of all passengers traveling by air do so for purely business reasons. For businessmen engaged in cross-boarder trade, air transportation has offered a secure way of transporting their merchandize from source to destination countries. The best thing about air transportation is that it can be used to transport a wide range of products – from small parcels to military hardware. For the airlines, it is estimated that 50% of their yearly income comes from business travelers (OECD & Button).

It is clear that the demand for air transportation will continue to grow in the future despite new challenges of terrorism and pandemics such as the swine flu. Opportunities are still available for growth, especially when modern airlines think along the lines of expansion (Bureau of Labor Statistics, 2008). However, many more challenges for the industry are lined up in the horizon. As such, freight and passenger airlines must always focus on expenditure control, monetary preservation, and cautious growth. But for now, air transportation has been able to successfully meet its fundamental obligation of offering quick, reliable, and secure mode of transportation, in the process positively impacting international trade.

Alaz, C. (2005). History of air cargo and airmail from the 18 th Century . Google Consultant. ISBN: 9780954889609.

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Hubner, W., & Sauve, P. (2006). Liberalization scenarios for international air transport . Web.

Lane, F.A. (1986). Cargo flight – An adventure into flying history: The world’s first air cargo shipment . Columbus, OH: Prop Press Association

Martins, S.W. (2009). Tracing the history of the airfreight forwarding industry . Web.

OECD & Button, K. (1997). The future of international air transport policy: Responding to global Change . OECD Publishing. ISBN: 9789264154032.

Siddiqi, A. (2007). A history of commercial aircraft . Web.

Taft, G.F. (1986). Airfreight: The past, present and future: A study of the airfreight industry in North America . Research Report No. 8. Halifax NS: Canadian Marine Transportation Centre.

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Bibliography

IvyPanda . "History of Air Transportation and International Trade." December 4, 2022. https://ivypanda.com/essays/history-of-air-transportation-and-international-trade/.

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