Why International Trade? – Advantage and Disadvantage

Countries cannot live in isolation. They have to mutually share their prosperity, technical know-how and undertake trade in order to sell their surplus products. The world economy is inter-dependent. Economic progress of a nation would depend upon its ties with other countries.

How does a country benefit from trade relations?
Countries maintain trade relations with each other. The exchange of goods and services between countries is known as international trade. A country requires a market for its goods. Markets are available locally as well as internationally.

A businessman or woman has to make profits by selling his or products in the market. They should be buyers. In case, there are no buyers, the products will lie waste. Similarly, services also need to be availed of. The provider of services makes his or her income when people make use of their services and pay for it. In other words, both seller and buyer are important in business process.

At the local level, the citizens make use of the services and buy products for their personal consumption. At the international level, at times a respective Government plays a major role in the selling of a product by an international producer of another country. Often you come across machinery parts and machines as well which have been produced in another country. Garments are also exported. India exports its cottons to the Western world. One comes across Taiwanese or Chinese imports in India as well as those of Japan.

Benefits of International Trade – Advantage of international trade

• Monetary gains to the respective country indulging in trade.
• More variety of goods available for consumers.
• Better quality of goods.
• Competition both at the international level as well as local level.
• Closer ties between nations.
• More exchange of technical know-how.
• Local producers will try to improve the quality of their products.
• Increase in employment locally.

Disadvantage of international trade

• Local production may suffer
• Local industries may be overshadowed by their international competitors
• Rich countries may influence political matters in other countries and gain control over weaker nations.
• Ideological differences may emerge between nations with regard to the procedures in trade practices.

International trade is beneficial to world economy. It adds to the money coffers of the world at large. Every country can benefit monetarily if it is able to dispose off its surplus goods after meeting the requirements of the local people.