International trade refers to process by which countries exchange goods and services between them at a price which is dependent on the demand and supply of good or service which is being traded. In the past international trade was not that significant but due to advancement of technology and globalization the distance between countries have become less and that is the reason why there is tremendous growth in international trade in recent years. Given below are some of the advantages and disadvantages of international trade –
Advantages of International Trade
- All the countries are not gifted with same set of natural resources and therefore it is not possible for nations to be self dependent on everything and hence with the help of international trade a country can import from other countries the products which can’t be made by them.
- Some countries have better technology and their location is such that they can produce the product at relatively cheaper rate than any other country and hence it is better for other countries to import such product rather than manufacturing it in their own country because it leads to wastage of resources and money. In other words one can say that international trade helps in improving the efficiency of countries leading to economic use of precious natural resources of world.
- In terms of geopolitical relations between countries international trade can be helpful because when two nations are dependent on each other due to international trade chances are they will not indulge any war with each other and hence international trade indirectly helps in maintaining peace between countries.
- The manufactures of product get better value for their produce because had there been no international trade they would have been forced to sell the product in local markets at any price due to limited demand while in case of international markets they get better price due to larger market and higher demand for their products.
Disadvantages of International Trade
- The biggest disadvantage of international trade is that it leads to exploitation of importing country by the exporting country as importing country is price taker and therefore it has to pay the price fixed by exporting country. For example crude oil cannot be produced by every country and that is the reason why crude importing countries are at disadvantage all the time due to near monopoly of oil exporting nations.
- Another disadvantage of international trade is that sometimes countries export harmful products to other countries leading to damage to environment of importing country and hence international trade poses environmental hazard for nations doing international trade.
- International trade can lead to domestic turbulence because sometimes nations export products even though domestically they are scarce leading to rise in prices of such products which create frustration in the minds of general public and anger towards the ruling government.
- International trade also leads to unemployment and local small manufacturers going out of business because many products which are manufactured by local producers cannot compete with imported products due to better quality and cheap production price and customers also tend to give preference to imported products due to better quality and relatively cheaper rates when compared to indigenous manufactured products.
As one can see from the above that international trade has benefits as well as limitations and therefore a country should be aware about it because ultimately it is up to the country whether it wants to use international trade for the welfare of the people or for ruining the nation.