Summary: The Importance Of International Trade

Trade including export and import is very important for a country’s economy. There have been many famous scholars defending their theories about the importance of trade for a country. David Ricardo, a British political economist as well as one of the influential classical economists, introduced the concept of comparative advantage. He suggested that a country shall concentrate or allocate its resource in industries where it is most internationally competitive and trade with other countries to get the goods which are not locally produced. He also claimed that if one country is more competitive in every area than its trading partner, there is mutual national benefit. Specifically, the country shall concentrate resources only on the industries

Barker and Kaynak (1992) stated that exporting is economically important to the trading nations and their firms owing to the fact that exports enhance profitability, maximize the capacity utilization, generate jobs, and improve trade balances. Kavoussi (1987) conducted a research study on 73 middle and low-income developing countries, and he found out that higher rate of economic growth is positively correlated with the export growth. He claimed that such correlation remains positive for both middle and low-income nations; however once the countries become more developed, the effect tend to be diminishing. Balassa (1986) and Dollar (1992) argued that the countries that practice outward-oriented developing economies experience a faster growth rate than those practicing inward-oriented developing ones. Coe and Helpman (1995) did a research study about the international research and development (R&D) diffusion among 21 Organization for Economic Cooperation and Development (OECD) countries and Israel over the period of 1971 through 1990. As a result, they found out that international trade is a significant channel of transferring technology between countries. Keller (2011) claimed that international trade which is associated with importing and exporting intermediate goods largely contributes to the technology

In his study, he suggested 20 different barriers in exporting matters. They are the existence of tough competition abroad, inability of the exporters to offer satisfactory price, bad economic condition in the destination area, limited government assistance and support, lack of information to analyze the market abroad, high political risk, perception of high business risks and cost abroad, the existence of tariff and non-tariff barriers, inadequate working capital, shortage of infrastructural facilities, restrictions imposed by rules, various customer habits and attitudes, difficulty in locating and obtaining representation, unfavorable foreign exchange rates, product standards and specifications differences, unfamiliar business practice in the foreign countries, lack of professional and trained staff, diversity of language and culture, handling documentation and procedure difficulty, and inability to offer technical after sales service (Leonidou, 2000). Another research undertaken by Ahmed, Craig, Baalbaki, and Hadadian was to explore the problems of exporting. He found out the five main issues contributing to the export barriers. They are lack of government assistance, competition in overseas markets, pricing and promotion policies, limited financial capital, and high tariffs. (Ahmed et al., 2004). Moreover, a research