International trade is one of the driving forces in today’s world economy. Most of the global superpowers such as America and China rely heavily on trade for economic growth. Without it the steady growth of manufacturing output we have seen in many countries the last couple of decades would cease. Trade is crucial in many sectors of the Economy and provides millions of jobs throughout the world to small and large businesses who rely on the exportation of their products in order to thrive. However, producers are not the only ones who benefit from trade. Foreign competition helps reduce prices for consumers and gives the people a broader variety of products and services to choose from.
Due to the rise of globalization and industrialization in the recent decades, there has been a surge in international trade. The number of multinational companies has increased tenfold because people are now more aware of the different products being offered around the market. This has resulted in remarkable economic development around the globe. By selling oversees, companies have been able to achieve unforeseen levels of growth, that would have been impossible to reach, had they only been selling domestically. The growth that can be seen not only benefits the countries and the companies that partake, but also the people they employ. Due to the increase in demand of a product that is being sold overseas, companies hire more workers. By providing more jobs the economic stability of a country is improved, creating a better standard of living
Countries gain economically by trading. Why would a country produce something when it could be acquired at a lower cost somewhere else? Due to their geographical and technological differences, countries focus on producing in their area of expertise. Some countries are more efficient at producing certain products than other countries and in these scenarios, trade plays a crucial role. A great example is Saudi Arabia, who leads in the production of oil, accounting for 17% of the world’s exports, but lacks the climate to produce oranges. Without international trade, Saudi Arabians would be unable to acquire their oranges from Brazil, whose climate is ideal for orange growth. Through trade, countries have access to foreign resources they cannot produce, such as certain natural resources, and agricultural produces. In other words, global trades make resources available that could not be domestically produced. However, not everything about trade is beneficial.
Although international trade is a very important part of today’s economy, it also has its problems. From exchange rate fluctuations, to domestic market disruption, trade defiantly has its downsides. The importation of foreign goods can easily destabilize domestic markets by offering cheaper goods. An example of this is China, whose manufacturing capabilities allow them to produce items for considerably less money than the U.S. A company that only sells domestically, would be unable to compete with a foreign country that can produce the same goods at a lower cost. While this may seem unfair to domestic producers, the competitiveness of foreign markets incentivizes efficiency, therefore creating more resourceful firms.
The pros of international trade heavily outweigh the cons. It is safe to say that trade provides the foundation for international growth, and has helped large, as well as emerging economies achieve sustainable growth. Trade improves financial performance, but more importantly, it incites market competitiveness. I believe international trade is a crucial component in today’s economy not only due to the efficiency it encourages in the markets, but also because of the expansion of employment and economic output it produces.
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