Advantages and Disadvantages of International Trade

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

  1. 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.
  2. 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.
  3. 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 any war with each other and hence it indirectly helps in maintaining peace between countries.
  4. The manufactures of product 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 case of international markets they get better price due to larger market and higher demand for their products.

Disadvantages of International Trade

  1. 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.
  2. 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.
  3. It 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.
  4. 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 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 it for the welfare of the people or for ruining the nation.

0 comments… add one

Leave a Comment


Related pages


what is materiality principle in accountingimportance of accounting conventionsmeaning of escrow account in bankunqualified financial statementsmerits and demerits of internetdifferent elasticities of demandhow to prepare fund flow statement from balance sheetfdi abbreviationwhat is capm modelcapital budgeting decisions exampleswhat are mixed economiesreal world example of monopolistic competitionexplain process costingadvantages of a capitalist economyfund flow and cash flow statementdisadvantages of specialisationsystematic risk and unsystematic risk definitionadvantages and disadvantages of organizational structuresthe materiality principlefeatures of capitalist economyadvantages and disadvantages of electronic fund transferunearned revenue journal entrypros and cons of autocratic leadershipexample of inelastic goodswhat is oligopoly and monopolybenefits of autocracywhat is a floating currencydividend wikipediagolden rules of accounts with exampleswhat is the difference between accounts payable and accounts receivabledisadvantages of slumsadvantages of a traditional economydisadvantages of economic growthfactors influencing elasticity of demandexample of law of diminishing returnsbenefits of barteringcarriage inwardadvantages of subsidiary booksperpetual successionis salaries payable a current liabilitystrengths of socialismmerits and demerits of plastic moneyadvantages and disadvantages of capitalist economic systemdebt factoring exampleskimming policywholesale funding vs retail fundingadvantages and disadvantages of horizontal communicationdisadvantages of absorption costingadvantages of convertible bondsdemerit of capitalismstrengths and weaknesses of autocratic leadershipmoil ipoadvantages and disadvantages of promotional pricingcharacteristics of capitalist economic systemdecentralised structureskim strategydefinition of current liabilitiesprepaid insurance journal entry exampleovercast meaning in accountingmerits and demerits of bankingtypes of cheques pdfbills receivableadvantages and disadvantages of specialisationwhat is the difference between a debtor and a creditorunearned revenue accountingunearned revenue journal entriesexamples of consumer durablesautocratic coachingwhat is direct quotation and indirect quotationhow to write a crossed chequedemerits of decentralisationfeatures of globalisation