The Advantages And Disadvantages Of International Trade

1. INTERNATIONAL TRADE

International trade is defined as a process of exchanging capital, goods, and services across international borders or territories. In another word, organizations that exchange their goods and services among nations of the world. For a resourceful country such as China, United States, Germany, etc. Their export value represents significant shares of a country Gross Domestics Product. For instance, China exported USD $2.06 trillion worth of products, this number represents 18% of the country GDP. The traded product, ranging from natural resources, metal, consumable products, and electrical item. For example, Mineral oil, processed petroleum product, electronic circuit board, machinery, automobile parts are among the most

According to David Ricardo, free trade promotes specialization, it enables domestic workers to concentrate those good and services they have competitive advantages with. In simpler words, business does what they are good at and kaizen applies to this strength to further strengthen their advantages.

3. FREE TRADE AREA (FTA)

A free trade agreement is a set of policies set by 2 or more countries that have few or no price controls in the form of tariffs or quotas between each other. Free trade agreement allows the agreeing nations to focus on their comparative advantages and to produce the goods they are comparatively more efficient at making, thus increasing the efficiency and profitability of each country.

4. OBJECTIVE OF FTA

Free trade agreements typically concern on import & export terms imposed by both agreeing countries. For instances, Import tax, it is one of the critical tariffs, it can impact the market directly, making the imported goods more expensive. Thus, the existence of FTA is to negotiate with partnering country to lower their import tax. For example, in recent FTA or Japan Australia Economic Partnership Agreement, Japan agrees to lower agricultural import tax from Australia to increase its passenger & good vehicles and engineering equipment export to

Increased Economic Growth

FTAs can increase economic productivity and contribute to higher GDP growth by allowing domestic businesses access to cheaper inputs. US economy has proven 0.5% growth per year benefiting from North American Free Trade Agreement (NAFTA).

II. Dynamic Business Climate

FTA promote dynamic business environment, countries with protective business regulation can be benefitting when tariffs are lowered and new technologies are introduced. Local organisations are able to import new machinery, technologies to increase productivity, experiences knowledge and opportunity to expose their good and services at international level.

III. Lower Government Spending

FTA easing import and thus lower tax, it helps lessen burden of local companies and thus, helping local government in saving subsidies. These budget, can be relocated in other expenditure.

IV. Promote Multi Culturalism

FTAs foster freer trade flows and create stronger ties with our trading partners. Based on differ context, FTA does benefit tourism industry by easing immigration process, this promote multi culturalism and encourage local business to understand different culture, this can benefit their business expansion.

V. Promote