Advantages Of International Trade

Theory of International Trade

International Trade takes place because of the variations in productive factors in different countries. The variations of productive factors cause differences in price in different countries and the price differences are the main cause of international trade. There are numerous advantages of international trade accruing to all the participants of such trade. A few of such advantages are mentioned below:

• Efficient use of productive factors: The biggest advantage of international trade relates to the advantages accruing from territorial division of labour and international specialization. International trade enables a country to specialize in the production of those commodities in which it enjoys special advantages.

It should, however, be remembered that the gains arising from international trade shall be available to the participating countries only if trade is free and unfettered. If the trade is subjected to tariff and non-tariff restrictions by the trading countries, the gains of international trade get nullified in the process to a large extend.

What is International Trade?

Indians drive cars made in Japan, use VCR�s made in Korea. Americans drive cars made in Germany, use VCR�s made in Japan and wear clothing made in China. Japanese watch American movies, Egyptians drink American cola and Swedes jog in American running shoes. The world economy is more integrated than ever before.

International Trade shapes our everyday lives and the world we live in. Nearly every time we make a purchase or sale, we are participating in the global economy. Products and their components come to our store shelves from all over the

This means that countries have to work together more closely and rely on each other for prosperity.

International trade occurs because individuals, businesses and governments in one country want to buy goods and services produced in another country. Trade provides people with greater selection of goods and services to chose from and often these goods are available at prices lower than those in the domestic economy.

International trade is the system by which countries exchange goods and services. Countries trade with each other to obtain things that are better quality, less expensive or simply different from what is produced at home.

What are the benefits of international trade?

To become wealthier, countries want to use their natural resources � land, labour, capital and entrepreneurship � in the most efficient manner. However, there are differences among countries in the quantity, quality and cost of these resources. The advantages that a country has may vary according to the following.

• Abundant minerals

• Climate suited to agriculture

• Well-trained labour