Contribution of International Trade

Published: 2017-08-30 07:31:26
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Abstract

International trade has grown over time with the current nature of globalization, nations have engaged in inter-continental trade so as to acquire the products that may have shortages in their countries or are needed for complementing the production of other goods. International trade has thus contributed to the economy of countries internationally in different ways.

Introduction

International Trade involves the exchange of goods, capital or services across international territories and usually encompasses the activities done by either individual or the government. According to Abedini (n.d), it signifies a huge part of the GDP for countries that engage in such trade. People engaged in international trade even in the past hence has social, economic and political significance. These goods and services that come into a country are imports while exports are those that leave a state. The economy of the world has an inter-dependency characteristic where states need to share technical knowledge and sell surplus goods. Different countries engage in international trade to promote industrial growth and encourage a good relation amongst countries.

Global trade takes place because of certain salient features such as the need for interdependence because resources and human wants differ from one state to another. Also, technological advancements, commercial and labour abilities and factor endowments amongst several countries differ. Abedini adds that International trade takes place also due to the high immobility of elements of production such as capital and human labour between states. Thus, this kind of trade results from the regional separation of labour and other important resources. In the recent years, international trade attributed to prosperity, the growth of the economy and development of most industrialized countries.

Advantages

Eradication of poverty

International trade contributes to the reduction of poverty levels amongst countries engaging in it as per Occupy Theory (2014, p.2). For instance, since China engaged in global trade it experienced a growth in its gross domestic product thus enabling it to provide for its citizens. Additionally, international trading creates job opportunities for people as their countries participate hence enabling them to improve their standards of living. For example, several emerging economies such as Haiti depend on global trade to help reduce their poverty levels since it promotes economic progress. Additionally, this form of trade enables and promotes the increase in revenues in revenues. Poor countries have turned to international trade to help improve their economic growth as well as encourage development and equality so that there can be access to the resources and other necessary amenities.

Specialisation

Different countries engage in producing goods that their resources are adequately enough to make them. For instance, a state that has adequate land and few workers needs to engage in producing only arable products. However, a country like Hong Kong has a limited availability of land and highly skilled workers but engages in financial services. Specialization through international trade promoted higher output where customers enjoy a wide variety of goods and services at relatively low prices. Specialization encourages global trade hence help businesses share managerial ideas and knowledge, technology and information on new business ideas (Singh, 2009, p.24).

Additionally Uhlhaas (2003), states that through specialization international trade facilitates increased competition to businesses enabling them to be more effective and efficient in their production. International specialization promotes countries to maximize their scarce resources to produce goods and services in high volumes. Mass production by these states encourages exports and imports amongst countries that engage in specialization. Specialization encourages efficiency because a producer of a certain state takes advantage of economies of scale and new technologies. Ultimately, the specialized countries surpass those unspecialised putting them at a more competitive advantage.

Disadvantages

Diffusion of economic problems and rivalry

Through international trade, there are high chances that one country transmits its economic disturbances to another thus affecting it. For instance, in 1929 the American market experienced a huge downfall due to global trading and resulted in a depression worldwide. It creates disturbances that lead to the downfall of a country`s economy. Additionally, engaging in such trade sometimes trigger rivalry causing friction and conflicts (Uhlhaas, 2003). A good example is Germany that tried to create and expand to new markets to sell its goods but ended up contributing to the occurrence of the world wars. Germany wanted to the worlds super power both militarily but most of all wanted to control the worlds economy by being the dominant world economic participant. They subdued other nations from trading highly in competitive products that could undermine the image of theirs, this resulted to the retaliation of many European states and eventually led to the outburst of a world war and later on came the cold war. Competition in the trading industry usually because of difference in trade interests result in relationship strains and discourages good trade.

Cultural identity and welfare concerns

Singh (2009) noted that culture being a significant export shows and upholds the different lifestyles, customs, and values of different countries (p. 176). For instance, engaging in international trade in the American community poses challenges to some businesses because they are dazed by the ideals of the American culture. Through trade, the products sold normally display cultural ideas and values of different cultures make a good. Companies such as Coca-Cola and Nike produce and sell commodities that represent the corporate culture of America.

Also, maintaining the health and safety, minimum wages and compensation benefits are social welfare factors that businesses need to incur. For instance, if a business makes shoes as a product and these welfare issues are undermined then it expects to sell at a lower price. Thus, engaging in international trade exposes some countries to cultural shocks that may negatively affect their operations and further expansion (Uhlhaas, 2003, p.5). Additionally, different cultures have different languages, and the issue of language barriers arise. Language barriers do not have a positive effect on the business especially as it tries to enter into new markets.

Conclusion

From the above discussion we can therefore see the advantages that result from international trade. Economies have grown significantly while accessibility to commodities has become abundant. However international trade has negative attributes as indicated in the discusiion but the advantages outweigh the disadvantages of international trade at every aspect since economic growth is the most essential factor for the welfare of the countries.

References

ABEDINI, J. (n.d.).What is international trade. Gsme.sharif.edu. Retrieved 9 July 2016, fromhttp://gsme.sharif.edu/~trade/

Advantages and Disadvantages of International Trade. (2014). OccupyTheory. Retrieved 9July 2016, from http://occupytheory.org/advantages-and-disadvantages-ofinternational-trade/

Singh, R. (2009). International trade operations. Excel Books India. p. 176

Uhlhaas, A. (2003). What are the main advantages and disadvantages of global free trade?Does it exist in practice?. Munich: GRIN Verlag GmbH. p. 5

sheldon

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