Benefits of International Trade
Dr.S.NAGALINGAM,
M.Com., M.Phil., P.G.D.C.A., Ph.D.,
Assistant Professor,
PG & Research Department of Commerce,
Cardamom Planters’ Association College,
Bodinayakanur.
Dr. S.Nagalingam
Benefits of International Trade�
Meaning
International trade contributes to better business opportunities, higher living standards, thus, leading to improvement in the world economy, while also providing customers with the variety to choose from products across the globe. Some of the advantages of international trade are:
Dr. S.Nagalingam
1. Utilization of Resources�
Through the establishment of international trade, several countries use their locally available resources and raw materials by exporting it to other countries that need them. For instance, countries in the Middle East export oil – which has a high demand in countries like India.
Dr. S.Nagalingam
2. More variety for Customers�
Apart from comparative advantage and relative input costs, one of the key benefits to customers from international trade is a range of products. For instance, Indian ethnic wear is sold in marketplaces across the world, like Gucci from Italy is available in India. This allows customers to choose from a large variety depending on their tastes and preferences.
Dr. S.Nagalingam
3. Competitive Pricing�
As a result of international trade, the global market has become more competitive. This competition encourages countries to produce high quality goods to grow their exports. As more producers market their goods, individuals get the advantage of competitive pricing.
Dr. S.Nagalingam
4. Economy Growth�
As more countries engage in international trade, foreign investment increases. When producers invest money or resources in producing goods outside of their country of origin, it is termed as Foreign Direct Investment (FDI). A country may realize that labor is cheaper in another country and choose to build a manufacturing plant there to produce its goods to cut production costs.
Dr. S.Nagalingam
Types of International trade�
1. Bilateral Trade
Bilateral trade is the exchange of goods between two countries – consider the barter system as an example here, where two countries agree to trade a commodity in return for another commodity. For instance, country X might export machinery to country Y in exchange for oil.
2. Multilateral Trade
Multilateral trade is the exchange of goods between more than two countries. One country might enter into trade agreements with multiple countries at a time.
Dr. S.Nagalingam