Essay on the Advantages and Disadvantages of International Trade !
Advantages of International Trade:
International trade which enable every country to specialise and to export those things that it can produce cheaper in exchange for what others can provide at a lowest cost have been and still are one of the basic factors promoting economic well-being and increasing national income of every participating country. The World Trade can increase real income and consumption two.
International Trade has many more benefits. It promotes growth and enhances economic welfare by stimulating more efficient utilisation of factor endowments of different regions and by enabling people to obtain goods from efficient sources of supply. Trade also makes available to people goods which cannot be produced in their country due to various reasons.
Small countries may gain more than large countries from world trade. This is because a small country can specialise in the production of a single commodity without significantly affecting its prices in the international market, but if a large country specializes in the production of a single commodity, the significant increase in the supply would cause a fall in its price, adversely affecting the terms of trade of the large country.
The gains from international trade may be summed up as follows:
(i) International trade encourages the development of the most efficient sources of supply.
(ii) International trade enables specialisation on a large scale because of the expanded market, which enables the realisation of economics of scale. When the size of the market is limited, certain investments are uneconomical.
(iii) International specialisation and the economics in production make goods available comparatively cheaper.
(iv) International trade increases real incomes and consumption. This could lead to expansion of employment and output and foster economic growth.
(v) Trade on a global scale makes available even goods that cannot be domestically produced.
(vi) Trade enables a country to conserve certain scale resources as commodities why embody these scarce resources may be imported from countries where they are abundant.
Disadvantages or problems of International Trade:
International trade has certain disadvantages as well:
(1) One important problem is that the gains from trade are not equally distributed. There is a general feeling that a major part of the gains from trade are concerned by the North i.e. developed countries.
(2) International trade sometimes leads to fast exhaustion of non- replenishable resources this is especially so in the case of south i.e. developing countries whose exports are mostly natural resources or commodities embodying natural resources.
(3) International trade sometimes ruins domestic industries and competition.
(4) International trade sometimes disturbs domestic economic institutions and structures, as well as social and political set ups.