International Trade: Advantages and Disadvantages

Introduction

One of the main drivers of national economies around the world is good and reliable international trade partnerships. According to economic experts, international trade is very important to a country’s economy with regard to expanding the market for its local products, as well as creating a good business environment for foreign investors (Neelankavil and Rai 36). The exchange of goods and services between countries is heavily dependent on the existing social and political structures. This means that poor political relations between countries often compromise the ability to have trade partnerships between countries (MacCharles 56). In addition, studies have established that the process of socialization also influences the way countries conduct business with each other. This is very practical in the contemporary world of technology, where business is happening online and across various social networks (Shakespeare 36). However, it is important to note that lack of planning, coordination, and poor market analysis can lead a country to experience negative effects from trading with others. International trade developed under mutual interests is very helpful to a country, although it can have negative effects in case of a fall out between the involved parties.

Advantages of International Trade

According to economists, some of the notable advantages of international trade include the ability to optimize various natural resources, specialization, stability of commodity prices, increased efficiency in terms of production, improved infrastructure, improved living standards, enhanced competition, industrialization, and ability to deal with natural calamities among others (MacCharles 106). A good example of a country that has benefited from international trade is Japan. The Asian country is known for its impressive automobile manufacturing industry. Over the years, the country’s economy and the standards of living of its people have grown due to the increasing demand for cars. One of the country’s biggest markets is in Africa, where people buy both new and second hand cars (Veraart 77). Japan has one of the most stable and highly expanding economies in the world today.

Disadvantages of International Trade

According to economic experts, some of the notable demerits of international trade include exhaustion of resources, demise of domestic industries due to lack of restrictions, unhealthy consumption habits, economic dependence, lack of political stability due to the influx of foreigners, and hardships in times of war among others (Wing 200). All these challenges come because of poor planning, unprecedented market trends, broken trust, and political instability. According to economists, several countries suffered in their international trade activities due to the global financial crisis. A good example of a country that suffered at the time is China. China has numerous foreign markets that rely on the commodities exported by its industries. During the financial crisis, the country lost several markets due to a decrease in the demand for its products and services, which eventually had a huge negative impact on its foreign revenue. These two major impacts led to a much bigger problem characterized by unsustainable growth and a major slowdown in the expansion of the economy (Stone and Carr 49). Many families were affected due to loss of jobs and an increase in the cost of living.

Conclusion

International trade is very pivotal to a country in terms of economic development and improved relations with other market players. With good planning and thorough market analysis, international trade can boost a country’s growth rate to unprecedented heights within a short period. However, inability to consider the two crucial elements can lead to unsustainable development and higher living standards for the people due increased dependence on imported goods.

Works Cited

MacCharles, Donald. Trade among Multinationals: Intra-Industry Trade and National Competitiveness. Routledge, 2013.

Neelankavil, James, and Anoop Rai. Basics of International Business (Revised Edition). Routledge, 2014.

Shakespeare, Kevin. Trade for Good: The Essential Guide to Business and Finance in UK and International Trade. Academy Press, 2011.

Stone, Peter, and Indira Carr. International Trade Law (Revised Edition). Routledge, 2013.

Veraart, John. International Trade and Port Logistics. Avontade, 2011.

Wing, Kwai. International Trade Finance: A Practical Guide (2nd Edition). City University of HK Press, 2011.