Introduction: International trade is the exchange of capital, goods and services across the international boarder or territories. In most of the country it represents a significant share of the domestic GDP of the country. Importance of International Trade: International trade consider as a backbone of our Morden commercial world. Producers of the various nations try to make profit through expanding the market rather than be limited to selling within their own boarders. Lower production cost in one region versus other regions, specialized industries, lack or surplus of natural resources and consumer tastes etc., are the various reasons for the occurrence of trade across the countries.
CHAPTER I: THEORETICAL BACKGROUND Export is a vital part in international trade which has been going for thousands of years. That a country has any product to export means there is at least one other country to import that product. Then international trade happens; in other words, international trade is the exchange of goods and services which may be tangible and intangible across national boundaries for maximizing their economic profits. It creates opportunities for countries to be involved in the international division of labor, economic development and enrichment for themselves. In many trade-dependent countries, export turnover occupies a large percentage in GDP.
Trade and Finance International economics is a broad field of study that is divided between two subfields -- international trade and international finance. Economists can and do spend their entire careers in either subfield, but usually have a keen understanding of both. • International Trade: This is the study of the flow of goods and services among the nations of the globe. The primary focus is on how and why goods are traded, especially the identification of key principles such as the law of comparative advantage. The objective of an international trade course is to understand the effects of international trade on individuals and businesses and the effects of changes in trade policies and other economic conditions.
And also, as a result of international trade, the market contains greater competition with more competitive price and cheaper products. This essay will focus on the definition, advantages and consequences of international trade with considerable theories and evidence. First point I want to emphasize is that international trade is the exchange of goods and services between countries. This is the type of world economy and trade, prices, supply and demand, impact which influences world events. Political change in Asia is inclined to lead to increase labor costs, thus increase the production costs of sneaker companies.
1. The benefits of international trade: Encourage a nation's economy progress: International trade allows a country to utilize its resources to the highest extent. Moreover, different countries possess different kind of resources, so some countries can manufacture and offer same goods at the cheaper price (Heakel, n.d.). In addition, international trades also help to sell the surplus products in domestic market to foreign market which prevent price falling in home market (Patel, n.d.). Lastly, companies can source cheaper and/or better raw materials from import making them more sustainable and profitable.
Globalization has been around for thousands of years, people used to exchange goods and services through bartering – trading products or services of similar values. With the emergence and adoption of currency, trading and services became more efficient. Subsequently, the developments in transportation and communication revolutionized this exchange, and then came the formation of corporations buying, selling, and transporting commodities to far greater distances around the globe (Globalization101, n.d). Trading is the most visible aspects of globalization, but over the past few years, foreign investment has grown more rapidly than trading and production. International investment includes commercial loans offered by banks to foreign businesses or governments, official flows – development assistance given by developed nations to developing ones, foreign direct investment (FDI) – foreign investors take substantial shares in a foreign entity, and foreign portfolio investment (FPI) – a portfolio of investments in a smaller amount without controlling stake in a foreign entity in the form of stocks or bonds (Globalization101, n.d).
The rationale lies in the belief of many economists, that trade is the engine of growth, in the sense that it can contribute to a more efficient allocation of resources within countries as well as transmit growth across countries and regions. Exports, and export policies in particular, are regarded as crucial growth stimulators. Exporting is an efficient means of introducing new technologies, both to the exporting firms in particular and to the rest of the economy, and exports are a channel for learning and technological advancement. Moreover, the growth of exports plays a major part in the growth p process by stimulating demand and encouraging savings and capital accumulation, and, because exports increase the supply potential of the economy by raising the capacity to import (Muna and Norma, 2009). According to Mannur (1995) trade is based on the fact that no country can produce all goods and services, which people need for their consumption largely owing to resources differences and constraints.
The regional trade understandings or agreements determine the scope of globalization. Trading in European Union and special agreement in the erstwhile Soviet block and SAARC are examples. (6) Industrial Organisation: The technological development in the areas of production, product mix and firms are helping organisations to expand their operations. The hiring of services and procurement of sub-assemblies and components have a strong influence in the globalisation process. (7) Technologies: The stage of technology in a particular field gives rise to import or export of products or services from or to the country.
Internationalization Internationalization is the exchange of products and services throughout different countries. It is important to trade internationally for a nation’s economic importance and welfare. The need for exporting goods and services means that there will then be a revenue available for the purchase of imported goods which are not available in that country. The strength of a countries economy can be measured by the gross domestic product. (GDP) the GDP of an economy will rise when sales increase.
The exchange of goods and services across national borders or territories is known as international trade. International trade is the backbone of our modern and commercial world. This trade gives rise to a world economy, in which prices, supply and demand, affect and are affected by global events. International trade allows us to expand our markets for both goods and services that otherwise may not have been available to us. Producers in various nations try to gain profit from an expanded market, rather than be limited to selling their products within their own borders.