Introduction to International Trade

International Trade

International trade is the economic interaction among countries involving the exchange of goods and services.In other words, it describes the system whereby countries sell exports and buy imports.Any country engaged in international trade is considered to be an open economy

Advantages of International Trade

Wider Choice of GoodsBy engaging in international trade, countries and their citizens can purchase, consume and enjoy goods that cannot be produced in their own country.e.g. Countries like Ireland do not produce any of their own oil, but by engaging in international trade Irish people can use oil products such as petrol and enjoy the benefits of them

Increased CompetitionInternational trade opens up competition from foreign suppliers to suppliers in the domestic market.This encourages domestic suppliers to adopt more efficient methods of production, and is also beneficial to the consumer in terms of price competition leading to price competition 

Market for Excess OutputWithout international trade, suppliers can only produce and sell that which is demanded by the domestic market.By opening up new markets through international trade, producers can enjoy the economies of scale that mass production affords the supplier as a result of increased international demand

International RelationsCountries benefit when they trade amongst themselves. Governments may partake in trade missions to foreign countries where they can build up positive relationships with foreign dignitaries.Furthermore, selling a product in a foreign market can develop positive associations between that product and its country of origin in the minds of foreign consumers

Higher Standard of LivingBy concentrating on the production of goods and services at which the country is relatively most efficient, the country can maximise its revenues and increase its standard of living

Introduction to International Trade