International trade allows countries, states, brands as well as businesses to buy and buy and sell in foreign markets.
It generally diversifies the products and services which can be received by domestic customers. In fact, international trade provides expansion and development potential without risking internal development and research.
Trade doesn’t lack problems. One of the involving countries may earn great profit through exportation but not the importation of goods and services. Also, it can be used to undercut the domestic market by offering valuable goods at cheaper prizes.
International trade has many advantages and disadvantages regardless of the form. Thus, in this article, we have covered various advantages and disadvantages of international trade.
Advantages of International Trade
International trade has endless advantages which include:
• Optimal Use Of Natural Resources
With international trade, every country is able to optimally use its natural resources. This enables each country to entirely concentrate on producing goods suited for its resources.
This helps in reducing and completely avoiding wastage of resources. When natural resources are used properly, it boosts the economic growth of the country.
International trade results to specialisation as well as encouraging production of varieties of goods in various countries.
Since specialisations result in the division of labour, the cost of producing goods can be relatively low leading to more production and high profits in return.
• Goods Availability
International trade enhances the availability of different types of goods in the market. In this scenario, a country is able to get goods which it’s not capable of producing or which it can’t produce due to relatively high cost through importation from the producing countries at lower cost.
• Large Scale Production
International trade makes a country to produce in large scale not only to feed its citizen but also for exportation to other countries.
This enables countries to dispose of the surplus goods they have in the international market. As a result, many countries adopt large scale production, which leads to advantages of large productions being obtained across the globe.
• Prices Stability
Due to international trade, wild fluctuations of prices are ironed completely. This enables equalisation of prices of goods worldwide ignoring other factors such as transportation among others.
Disadvantages of International Trade
Regardless of the many advantages international trade boast of, there are some disadvantages associated with it among them include:
• Economic Dependence
Underdeveloped countries most rely on the already developed countries to achieve their economic development goals. In such kind of reliance, developed countries take advantage and exploit underdeveloped countries economically.
A good example is whereby many of underdeveloped countries Africa, as well as Asia, have been taken advantage of by European countries and exploited beyond the limit.
• Hindering Home Industries Development
International trade poses a big threat towards the development of home industries, thus hindering their growth leading to collapsing.
This is facilitated by stiff competition as well as unrealistic imports which takes over the local market with cheap goods resulting in death of home industries.
• Political Dependence
Slavery and subjugation are among the things encouraged by international trade. In this case, country’s economic independence is impaired which also endangers political dependence.
A good example is whereby Britains went to India just as traders, but they eventually ruled over India for decades.
Advantages and disadvantages of international trade are endless. The discussed above are just a tip of the iceberg. International trade is engulfed by many advantages and disadvantages at equal measure.
However, there is no time international trade will cease to exist since countries can’t be able to produce all types of goods, meaning they must engage in international trade so that they can import what they lack.