Advantages and Disadvantages of International Trade??

The benefits of international trade have been the major drivers of growth for the last half of the 20th century. Nations with strong international trade have become prosperous and have the power to control the world economy. The global trade can become one of the major contributors to the reduction of poverty.

The advantages of globalisation (an economic view)

The economic benefits that greater openness to international trade bring are:

♦ Faster growth: economies that have in the past been open to foreign direct investments have developed at a much quicker pace than those economies closed to such investment e.g. communist Russia
♦ Cheaper imports: this is down to the simple fact that if we reduce the barriers imposed on imports (e.g. tariffs, quota, etc) then the imports will fall in price
♦ New technologies: by having an open economy we can bring in new technology as it happens rather than trying to develop it internally

Disadvantages of globalisation

The negative drivers of globalisation included culture which is a major hold back of globalisation. An example of how culture can negatively affect globalisation can be seen in the French film industry. The French are very protective of this part of their culture and provide huge grants to help its development. As well as government barriers market barriers and cultural barriers still exist.

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Advantages

* Optimum use of Resources: Foreign trade helps in the optimum use of natural resources and avoid wastage of resources.
* Stable Price: It ensures the presence of stable price by avoiding wide fluctuations in prices. It tries to equalize the world price.
* Availability of all types of goods: It enables a country to import those goods which it cannot produce.
* Increased Standard of living: It ensures more production to meet the demand of the people of different countries.
* Large Scale production: It ensures large production because the production is carried on to meet the demand of its people as well as world market.

Disadvantages

* It could lead to a more rapid depletion of exhaustible natural resources.
* It is a long distance trade and as such it becomes difficult to maintain close relationship between the buyer and the seller.
* Each country has its own language. As foreign trade involves trade between two or more countries, there is diversity of languages. This difference in language creates problem in foreign trade.
* Foreign trade involves preparation of a number of documents which also creates difficulties in the way of foreign trade.
* Some restrictions are imposed on export and import of commodities. These restrictions stands on the progress of foreign trade.
* Foreign trade involves a great deal of risks because trade takes place over a long distance. Though the risks are covered through insurance, it involves extra cost of production because insurance cost is added to cost.

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• Greater variety of goods available for consumption – international trade brings in different varieties of a particular product from different destinations. This gives consumers a wider array of choices which will not only improve their quality of life but as a whole it will help the country grow.

• Efficient allocation and better utilization of resources since countries tend to produce goods in which they have a comparative advantage. When countries produce through comparative advantage, wasteful duplication of resources is prevented. It helps save the environment from harmful gases being leaked into the atmosphere and also provides countries with a better marketing power.

• Promotes efficiency in production as countries will try to adopt better methods of production to keep costs down in order to remain competitive. Countries that can produce a product at the lowest possible cost will be able to gain a larger share in the market. Therefore an incentive to produce efficiently arises. This will help standards of the product to increase and consumers will have a good quality product to consume.

Hi

Advantages to consider:

Enhance your domestic competitiveness
Increase sales and profits
Gain your global market share
Reduce dependence on existing markets
Exploit international trade technology
Reduce dependence on existing markets
Exploit international trade technology
Extend sales potential of existing products
Stabilize seasonal market fluctuations
Enhance potential for expansion of your business
Sell excess production capacity
Maintain cost competitiveness in your domestic market

Disadvantages to keep in mind:

You may need to wait for long-term gains
Hire staff to launch international trading
Modify your product or packaging
Develop new promotional material
Incur added administrative costs
Dedicate personnel for traveling
Wait long for payments
Apply for additional financing
Deal with special licenses and regulations..

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1. Increased free trade between nations
2. Increased liquidity of capital allowing investors in developed nations to invest in developing nations
3. Corporations have greater flexibility to operate across borders
4. Global mass media ties the world together
5. Increased flow of communications allows vital information to be shared between individuals and corporations around the world
6. Greater ease and speed of transportation for goods and people
7. Reduction of cultural barriers increases the global village effect

Advantage :-

1.Spur of foreign competition: foreign competition will encourage domestic producers to increase efficiency. Carbaugh (1998) states that global competitiveness is a bit like golf, you get better by playing against people who are better than you.

2.Increase consumer income: multination will bring up average wage levels because if the multinationals were not there the domestic companies would pay less.

3.Increased investment opportunities: with globalisation companies can move capital to whatever country offers the most attractive investment opportunity. This prevents capital being trapped in domestic economies earning poor returns.


Disadvantage:-

1.Incur added administrative costs

2. Dedicate personnel for traveling

3.Wait long for payments

Also there is the loss of sovereignty that globalisation brings. Many anti-globalisation believers state that nations are loosing their identity and selling their soul.

Then there are environmental factors of globalisation as described earlier. These are becoming more and more controversial.

Hello
The benefits of international trade have been the major drivers of growth for the last half of the 20th century. Nations with strong international trade have become prosperous and have the power to control the world economy. The global trade can become one of the major contributors to the reduction of poverty.

David Ricardo, a classical economist, in his principle of comparative advantage explained how trade can benefit all parties such as individuals, companies, and countries involved in it, as long as goods are produced with different relative costs. The net benefits from such activity are called gains from trade. This is one of the most important concepts in international trade.

Adam Smith, another classical economist, with the use of principle of absolute advantage demonstrated that a country could benefit from trade, if it has the least absolute cost of production of goods, i.e. per unit input yields a higher volume of output.

Hi
Advantage : • More employment could be generated as the market for the countries’ goods widens through trade. International trade helps generate more employment through the establishment of newer industries to cater to the demands of various countries. This will help countries bring down their unemployment rates.

Ignore non Members : Trades unions only consider the needs of its members, they often ignore the plight of those excluded from the labour markets, e.g. the unemployed.

Disadvantage

Lost Productivity : If unions go on strike and work unproductively (work to rule) it can lead to lost sales and output. Therefore their company may go out of business and be unable to employ workers at all.

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