Advantages and Disadvantages of International Trade

International trade refers to the 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 the advancement of technology and globalization the distance between countries has 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

Helping Each Other

All the countries are not gifted with the 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.

Improvement in Efficiency

Some countries have better technology and their location is such that they can produce the product at a 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 the economic use of precious natural resources of the world.

Good for Geopolitical Relations

In terms of geopolitical relations between countries, it can be helpful because when two nations are dependent on each other due to international trade chances are they will not indulge in any war with each other and hence it indirectly helps in maintaining peace between countries.

Boon for Manufactures

The manufactures of products get better value for their produce because had there been no global trade they would have been forced to sell the product in local markets at any price due to limited demand while in the case of international markets they get a better price due to larger market and higher demand for their products.

Disadvantages of International Trade

Exploitation

The biggest disadvantage of international trade is that it leads to exploitation of importing country by the exporting country as importing country is a 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.

Damage to Environment

Another disadvantage of international trade is that sometimes countries export harmful products to other countries leading to damage to the environment of importing country and hence international trade poses an environmental hazard for nations doing international trade.

Domestic Scarcity

It can lead to domestic turbulence because sometimes nations export products even though domestically they are scarce leading to a rise in the prices of such products which creates frustration in the minds of the general public and anger towards the ruling government.

Unemployment and Closure of Business

It 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 indigenously 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 of it because ultimately it is up to the country whether it wants to use it for the welfare of the people or for ruining the nation.