International Trade: Commerce between countries all over the World
It is generally believed that international trade is done to make people better off. It is an important concept in economics, as it is believed that international trade is conducted to either achieve the absolute or comparative advantage of producing goods. One nation may have the capability to produce more goods and being more productive in producing all goods, by utilizing fewer resources (including labor and capital) as compared to other nations. Therefore, countries engage in trade through imports and exports with each other. Countries having an absolute or comparative advantage in producing any good may export it to other nations. While a country may import those goods in which it has a relatively less absolute advantage. Read the research paper idea further:
If a nation is twice as productive in producing clothes as its trading partner, but it is three times productive in producing steel as compared to the trading nation, then the country can gain benefit by producing and exporting steel and importing clothes. Considering this comparative advantage it can be said that international trade improves the living standard of both countries. It can be considered as a source of economic development.
Recent researches have shown that international trade results in increased competition from international firms. It forces less efficient firms out of the market and only more efficient firms are able to survive the cut-throat competition in the market. Furthermore, due to expansion and new entry of firms, better technology is used and consumers are available with new products of better quality. Thus, there is clear evidence that with firms becoming more efficient due to increased competition from international trades, there are not only more products in the market, but also there is a greater variety of products. Another advantage gained from international trade is increase investment as firms are able to access the greater quality of capital inputs for production. Therefore, as a result, of international trade, there is more investment and innovation in the economy, which eventually leads to higher sustainable growth in the country. There is a transfer of technology between countries with the expansion of product variety. Thus, it can be said that countries can be benefited from international trade by reducing trade barriers such as tariffs and other non-tariff barriers to trade.
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