Technological Innovation and Globalization
Name
Institution
In facts, international trade in most countries plays a significant share in the gross domestic product. It is defined as the exchange of goods and services across international borders. It is a well-documented fact; international trade enables countries to expand their market for both goods and services which otherwise may have not been accessible. It is for that reason; an individual may have options between the German, Japanese and American car. It is with no doubt, international trade has a number of benefits in that; almost every kind of goods are found in the international market for instance, clothes, food, oil, jewelry, water and wine among others. With this regard, it is vital to note that, international trade has various effects for countries along with traders. With this in mind, this paper seeks to analyze international trade in the context of its effects, theories that support the trade in addition, the reasons as to why global trading agreements are developed.
Effects of international trade
According to Hobson (1904), international trade enables wealthy countries to use their resources more efficiently. Some of these resources include technology, labor or otherwise capital. This is achieved because; countries are endowed with different natural resources and assets. In this regard, some countries may generate goods more efficiently thus, selling more cheaply than other countries. For instance, a country producing cotton sweaters may end up selling sweaters at a cheaper price especially to its citizens in that, the goods are easily available. With this regard, international trade enables countries to trade with other countries thus, making a country to resources more efficiently. In conjunction with this, international trade opens opportunities for specialization in that, countries obtain item more easily by trading with other countries. This implies that, if for instance a country cannot produce an item, it can access it by trading with another country.
In essence, international trade enables countries to participate in the global economy by encouraging opportunities for foreign direct investment. Grimwade (1989) argue that, international trade opens opportunities for individuals to invest in other foreign companies together with assets. As a result, it enables a country to grow more efficiently and easily. Additionally, foreign direct investment is fundamental in that; it is a mean through which foreign currency along with expertise enters the country thus; raising employment level.
On the contrary, to some extent, international trade encourage dependence in that, a country may so much depend on the other country and if calamities affect the country being depended it may cause starve in the country. Manaschi (1998) raises a contentious issue regarding this issue that, it is essential for the country to trade with many countries contrary to depending on one country.
Why nations trade
Having discussed the effects of international trade; various theories have emerged in response to why nations trade. In this context, comparative advantage theory outline why it vital for two countries to trade by evaluating that, despite the country been more efficient in production it can absolutely gain in trading with less-efficient countries. Quintessentially, comparative advantage was initially described by Robert Torrens in 1815 within an easy on Corn Laws. In the theory, he outlined the importance of nation’s trade by giving an example of, England’s advantage trading with Portugal for grain despite the possibility of producing the grain more cheaply within England than Portugal. The conclusion drawn from comparative advantage theory concept is that, each country gain through specializing goods, which in as a result, acts as a comparative advantage for trading goods with other countries. According to Brown (1914), Robert Torrens outlined a significant aspect of how nation’s trade enables countries to gain from the other through specializing their goods and services. It is a well-documented fact; competitive advantage theory outline that, nation trade occur because; countries have different capital, human and resources, which benefit the less efficient countries.
Why regional or global trading agreements are developed
Global trading agreements have been known to play fundamental roles in international trade. Intrinsically, global or regional trading agreement is a contract agreement between two or more countries, which outline, how regions will work together to develop mutual benefit within the field of trade as well as investment. With this in mind, it is worth noting that global trading agreements are developed for various reasons. First, they are developed for instant feedback along with second opinions. In this regard, Ravenhill (2008) argue that, when each partner input is considered before major decisions are made; it tends to eradicate barriers in trading. As a result, it is developed to clarify how business operates in addition, adding instructions regarding how business decisions are made in the partnership agreement. With this in mind, it is with no doubt; global trading agreements are developed to eradicate various barriers in trading such as heavy tariffs and visa permits. Partners benefit from easy access of visa permits. In conclusion, partnership agreement is developed to eradicate heavy tariffs that may be a barrier if not eradicated for instance, fear trading with other countries.
References
Brown, A.G. (1914). International trade: a study of the economic advantages of commerce. New York: Macmillan Publisher
Grimwade, N. (1989). International trade: new patterns of trade, production, and investment. New York: Routledge Publisher
Hobson, J.A. (1904). International trade: an application of economic theory. New York: Methuen Publisher
Manaschi, A. (1998). Comparative advantage in international trade: a historical perspective. London: Edward Elgar Publishing
Ravenhill, J. (ed). (2008). Global political economy. New York: Oxford University Press
Use the order calculator below and get started! Contact our live support team for any assistance or inquiry.
[order_calculator]