International Trade Benefits Essay Examples

International trade has flourished over the years due to the many benefits it has offered to different countries across the globe. International trade is the exchange of services, goods, and capital among various countries and regions, without much hindrance. The international trade accounts for a good part of a country’s gross domestic product. It is also one of important sources of revenue for a developing country.

With the help of modern production techniques, highly advanced transportation systems, transnational corporations, outsourcing of manufacturing and services, and rapid industrialization, the international trade system is growing and spreading very fast.

International trade among different countries is not a new a concept. History suggests that in the past there where several instances of international trade. Traders used to transport silk, and spices through the Silk Route in the 14th and 15th century. In the 1700s fast sailing ships called Clippers, with special crew, used to transport tea from China, and spices from Dutch East Indies to different European countries.

The economic, political, and social significance of international trade has been theorized in the Industrial Age. The rise in the international trade is essential for the growth of globalization. The restrictions to international trade would limit the nations to the services and goods produced within its territories, and they would lose out on the valuable revenue from the global 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.

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.

According to the principle of comparative advantage, benefits of trade are dependent on the opportunity cost of production. The opportunity cost of production of goods is the amount of production of one good reduced, to increase production of another good by one unit. A country with no absolute advantage in any product, i.e. the country is not the most competent producer for any goods, can still be benefited from focusing on export of goods for which it has the least opportunity cost of production.

Benefits of International Trade can be reaped further, if there is a considerable decrease in barriers to trade in agriculture and manufactured goods.

Some important benefits of International Trade

  • Enhances the domestic competitiveness
  • Takes advantage of international trade technology
  • Increase sales and profits
  • Extend sales potential of the existing products
  • Maintain cost competitiveness in your domestic market
  • Enhance potential for expansion of your business
  • Gains a global market share
  • Reduce dependence on existing markets
  • Stabilize seasonal market fluctuations

Essay about Advantages and Disadvantages of Free International Trade

1283 Words6 Pages

1a) Advantages of free international trade
1. Increasing the production.
Countries are enabled by free international trade to specialise or to focus in the production of the goods in which they have a comparative advantage. Specialisation countries can take the benefit of efficiencies generated from increased output and economies of trade. The size of the firm’s market are increased by the international trade which results in lower average costs and increasing in productivity, as it ultimately leads to increase in production.

2. Production efficiencies.
The efficiency of resources allocation is improved by the free international trade, as the higher productivity and increasing in total domestic output of commodities and services are…show more content…

1a) Advantages of free international trade
1. Increasing the production.
Countries are enabled by free international trade to specialise or to focus in the production of the goods in which they have a comparative advantage. Specialisation countries can take the benefit of efficiencies generated from increased output and economies of trade. The size of the firm’s market are increased by the international trade which results in lower average costs and increasing in productivity, as it ultimately leads to increase in production.

2. Production efficiencies.
The efficiency of resources allocation is improved by the free international trade, as the higher productivity and increasing in total domestic output of commodities and services are leaded by the more efficient use of resources . increase in competition promotes the use of new technology, innovative production methods, marketing and distribution methods.

3. Foreign exchange gains.
When a country sells exports overseas, it receives a hard currency from the other countries which buy the goods. When the country get the money from selling exports overseas they use it again to pay for imports such as electrical equipment and cars which are produces more cheaply by overseas.

4. Economic growth.
More competitive industries, increasing in productivity, efficiency and production levels creates rising living standards, higher rates of economic growth and increasing real incomes to the countries which are involved in free

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