Benefits of Trade Between Countries
reduce the incentive for war
increase the number of goods and services to be shared between countries
boost economic growth through specialization and increased competition in free markets.
advantages that large, long-established trading nations have over their smaller counterparts
preferential access to larger markets, which makes it easier to export. This may allow them to lower prices and increase sales at the expense of overall volume
bulk-buying power, which helps large nations to negotiate better terms with suppliers
more significant influence over international trade policy they have more votes in the World Trade Organization (WTO), for example
increased resources for research and development, for example, they may be able to invest in research that gives them a competitive advantage over other nations
more significant financial resources, they can afford expensive marketing campaigns or investments in other countries.
-countries that are heavily dependent on the export of agricultural products often have unstable food supplies, contributing to famine.
– importing goods from developing countries is often more expensive than buying from a developed country because the former tend to have less stable governments and economies that offer lower prices through subsidies.
A country’s balance of trade for imports is subtracted from its balance of trade for exports. Thus, if a country exports more than it imports, it has a trade surplus; if it imports more than it exports, it has a trade deficit.
Trade deficits become a problem when they are so big that the country can’t buy as much as other countries need. Trade deficits often lead to high unemployment and lower incomes for workers as local companies try to match foreign firms’ lower costs by reducing their labor costs. Trade surpluses, on the other hand, are rarely seen as a problem.
Trade is generally considered to be “fair” when both sides have roughly balanced costs and benefits. However, developing countries often have an unfair trade advantage over richer countries because their factories are not as technologically advanced, making it difficult for developed countries to compete with them even when they have a trade surplus.
Like the United States and many European nations, some countries allow foreign individuals and companies to buy and sell private property and business enterprises. But other countries do not—for example, in some African nations, foreigners cannot own land at all. This makes it difficult for foreign companies to make long-term investments in countries that limit foreign ownership.
In most countries, businesses have to follow local laws and regulations. These often aim to protect consumers from being sold unsafe or poor-quality goods, but they can also help enterprises sell their products at home and in overseas markets.
As a result of globalization, multinational corporations have gained more power over international trade. They often have the money and technological know-how that small companies don’t, giving them a significant advantage in influencing trade policy and negotiating business deals.
Export subsidies:
governments give financial support to encourage the export of goods manufactured by local companies
import quotas: limits on the number of goods imported from other countries
export tariffs: taxes on goods exported from one country to another
import tariffs: taxes on goods imported into a country from foreign markets.
Most international trade takes place in the context of international treaties and agreements. For example, many countries have signed an international agreement called the General Agreement on Tariffs and Trade (GATT), which sets rules for international trade.
Most countries levy taxes on goods and services to increase government revenue; these are often called tariffs or duties. Governments also use tariffs to help local companies compete with foreign ones by charging higher fees for imports than they charge exports, thus making it easier for the domestic company to sell its products in the importing country than for foreign companies to sell goods to the importing country’s consumers.
People often argue that international trade is necessary because each country doesn’t have every good or service that it needs, and therefore no one country can be self-sufficient. But this isn’t the case; for example, governments don’t have to import oil since they can produce it domestically.
Many people argue that the best way to bring jobs back from overseas is to reduce international trade agreements and tariffs, limiting access to foreign goods and increasing the costs of imports.
Other than that, there aren’t many different ways for countries with reduced trade relationships to grow their economies again; the only real solution is to develop their competitive advantages in the global market.
Benefits of international trade:
1. international trade helps the country overcome the scarcity of goods by importing goods that are not available or in shortage in their country through exports of other surplus items scarce within their own countries.
2. trade generates employment at home and abroad because it involves transport, communication, packing, insurance, etc., requiring human resources.
3. trade enables small countries to become self-sufficient in goods that are not available locally or insufficient quantity while at the same time exporting other goods that may be abundant within their domestic economy.
4. trade increases foreign currency earnings of the country, thus enabling her to import scarce items at lower cost and sell surplus goods at attractive prices.
5. trade widens the choice of goods available for consumption both for the consumer and the producer by permitting consumption to be diversified among various countries.
6. export trade provides an avenue through which a country can acquire foreign capital to help in industrialization or economic development.
7. export trade enables a country to acquire new know-how and technology by importing raw materials, components, capital goods, etc., from other countries.
8. trade can be used as an instrument of foreign policy in international relations by strengthening friendly ties with countries that are important for our own economic or military security.
Trade leads to the international division of labor, which benefits all the trading partners.
International trade enables a country to purchase goods at lower prices from other countries and sell those goods at higher prices which is beneficial as it saves money for consumers and producers. This would then increase economic growth that would lead to a higher standard of living.
Trade facilitates specialization in production, which enables a nation to develop its resources and capabilities within a limited field by division of labor.
trade can lead to economic growth via increasing competition between suppliers/exporters, thus stimulating innovation and efficient uses of resources through the pressure for cost reduction.
trade can promote regional development with increased demand for local goods and services in the vicinity of export-processing zones and more significant exports of local produce and raw materials to areas of the processing activity.
The substitution effect associated with trade is that when an item becomes cheaper, it encourages more consumption than before. In contrast, when an item becomes costlier, it promotes less consumption than before.
Trade can also improve the quality of life by making available a wide range of goods and services worldwide, including consumer items such as electronic gadgets, foods, clothes, etc., and capital items such as computers and machine tools that enable workers to produce more efficiently.
Benefits of international trade:
1. international trade helps the country overcome the scarcity of goods by importing goods that are not available or in shortage in their country through exports of other surplus items scarce within their own countries.
2. trade generates employment both at home and abroad because it involves transport, communication, packing, insurance, etc..which all require human resources.
3. trade enables small countries to become self-sufficient in goods that are not available locally or insufficient quantity while at the same time exporting other goods that may be abundant within their domestic economy.
4. trade increases foreign currency earnings of the country, thus enabling her to import scarce items at lower cost and sell surplus goods at attractive prices.
5. trade widens the choice of goods available for consumption both for the consumer and the producer by permitting consumption to be diversified among various countries.
6. export trade provides an avenue through which a country can acquire foreign capital to help in industrialization or economic development.
7. export trade enables a country to acquire new know-how and technology by importing raw materials, components, capital goods, etc., from other countries.
8. trade can be used as an instrument of foreign policy in international relations by strengthening friendly ties with countries that are important for our own economic or military security.
9. trade leads to the international division of labor, which benefits all the trading partners as it helps them to concentrate on those activities where their home country has a comparative advantage and benefit from specialization. There is no need for high import duties or quotas for restricting trade.
10. International trade enables a country to purchase goods at lower prices from other countries and sell those goods at higher prices which is beneficial as it saves money for consumers and producers.
11. trade facilitates specialization in production, which enables a nation to develop its resources and capabilities within a limited field by division of labor.
12. trade can lead to economic growth via increasing competition between suppliers/exporters, thus stimulating innovation and efficient uses of resources through the pressure for cost reduction.
13. trade can promote regional development with increased demand for local goods and services in the vicinity of export-processing zones and more significant exports of local produce and raw materials to areas of the processing activity.
Importance of trade in economic development:
1. trade increases the economic well-being of a country, i.e., consumer satisfaction and producer profits, by providing means of increasing national income or Gross Domestic Product (GDP)
2. trade facilitates the efficient use of scarce resources in a world with many alternative services for them, e.g., if one nation is poorly endowed with natural resources, another country may have abundant natural resources which are not valuable where they are but could be very valuable in the first situation.
3. trade can promote economic development by encouraging efficient use of scarce resources
4. trade helps the developing countries to grow faster than if their economies were closed to international trade
5. trade can be a powerful means of promoting economic development for poor and less developed countries
6. trade is more beneficial for developing countries than it is for advanced nations since they have a significant market behind them. Therefore, it would enable small nations to earn foreign exchange required for importing technology and capital goods from various other countries.
7. trade helps developing countries to increase their exports and earn more foreign exchange, which in turn enables them to import capital goods and technology from other countries, thus creating within a shorter period at lower costs
8. trade can serve as an engine of growth because it stimulates competition between suppliers, encourages efficient use of resources, and encourages the production of such goods that can be imported at lower costs with better quality if not produced domestically.
9. trade is essential for developing countries as it permits them to substitute imports for domestic products, thereby reducing consumer prices and allowing increased expenditure on other goods and services that indirectly affect the demand for labor.
10. trade, by increasing the range of food products available in each consumer’s location, reduces the variability of consumption across time and between individuals, which helps developing countries with low per capita real incomes.