There is always an opportunity to sell more, make more profits, increase the market share, remove seasonality fluctuations of demand and supply, increase in productivity, and of course a business or even a country learns a lot on the product development technologies and strategies from doing business with other countries or regions. This is one obvious benefit of international trade. These agricultural products can, however, be produced in abundance in certain African countries. They are also not able to take advantage of world boom because any improvement in their balance of payment does not lead to increased output and employment due to market imperfections and non-availability of capital goods. It is necessary for organizations to perform their due diligence before entering a foreign market with other organizations or countries so this risk is mitigated. A clear advantage of free trade advocates point out is the need for more workers by the exporting country. The effects of foreign factor movements have been that of creating a highly unbalanced structure of production of these countries.
In return, the other country which can offer a product or service as specialization can also take advantage of the theory and trade with each other. It benefits trading countries through competitive advantage. It's advantageous for us to buy from these countries because the products are cheaper and more Americans can afford to buy them. The India, for example, uses protectionist policies to limit the quantity of foreign- produced sugar coming into country. It is a way to avoid heavy domestic competition. Nurkse the possibility of gain from foreign trade to underdeveloped countries is restricted or limited. Mainstream economic thought holds that world trade benefits all parties involved; however, trade has a downside as well.
Therefore, it is a win-win situation for both trading nations. Countries that can produce a product at the lowest possible cost will be able to gain a larger share in the market. This requires abandonment of free trade. Not only does this make the country richer but it also improves the general welfare of the people of the country. Trade restrictions are typically undertaken in an effort to protect companies and workers in the home economy from competition by foreign firms. Raul Prebisch, there has been a secular deterioration in the terms of trade of underdeveloped countries.
With the increase in the scale of operation, the profit of the business increases. These exports suffer losses on account of : i Fall n their demand due to the tendency on the part of developed countries to establish heavy industries, ii Contribution of services in the aggregate production of developed countries has been increasing, iii Income elasticity of demand for agricultural production is less in developed countries, iv Many developed countries have been adopting policy of protection in respect of agricultural products, v Use of synthetic goods in place of agricultural products has been on the increase. Also let us take certain agricultural products such as cocoa and rubber which are very difficult to produce in developed places such as Europe and America. It leads to stabilization of prices of products throughout the world. For example, certain music or movies from a nation such as the United States cannot be sold in their original form, and sometimes not at all, in some other nations where culture or religion are prioritized because of the changes in mentality and behavior that they may incite. Let us take certain underdeveloped places in the world for example where things such as computers, mobile phones, vehicles, etc cannot be manufactured.
Cons of Free Trade 1. Despite huge foreign investments, the people have remained backward in their countries. The types of goods and services that flow from developed nations to emerging nations can have rapid and significant negative effects on their cultures. It is a key to economic growth. It is common in third world countries to find that people are required to work under unfair circumstances, which may include being paid low wages or subjected to unhealthy occupational environments.
This gives consumers a wider array of choices which will not only improve their quality of life but as a whole it will help the country grow. Proponents of free trade claim that a country which has enough resources to produce a certain product has the competitive advantage to specialize in this product and be the one to supply to other countries at a lower cost. Domestic production has reduced imports of oil and petroleum products. It allows for foreign exchange gain. This helps industrialisation of the country along with balanced growth.
When these countries are allowed to access large markets, it can result in job losses and the collapse of industries in the developed countries because they are no longer able to be competitive. For instance, most of the underdeveloped countries in Africa and Asia have been exploited by European countries. Even if there is not an issue with adverse treatment, it is still common to find that goods and services can be produced more cheaply in emerging countries. It is simply due to the reason that underdeveloped countries export mainly primary goods. Trade agreements ratified since the early 1990s have helped create a global marketplace, expanding global trade by opening more markets to goods from around the world. Provides the foundation of international growth: International trade is the foundation on which international growth is founded.
International trade helps generate more employment through the establishment of newer industries to cater to the demands of various countries. Workers live in desolate places to work and paid low wages. Failing to consider the expectation a different culture may have can lead to mistakes that damage the reputation of the brand and can be very costly to the bottom line. In the case of natural calamity, goods can be imported to meet necessaries. Non-Cooperation of Countries: Free trade policy works smoothly if all the countries cooperate with each other and follow this policy. Another example are toll road fees, it also are a type of consumption tax. International trade, as the name implies is trading that occurs between one country and other countries.
Research shows that exporters are more productive than companies that focus on domestic trade. People also believe that this leads to more efficient production methods, which in turn lead to an increase in technology. Diplomacy Countries that trade together are generally less likely to engage in conflict with one another than those that do not. However, world poverty has risen during that same period. Trade is not without its problems. This results in the shortage of goods within the home country.
A government can change laws in a discriminatory fashion or create regulations that directly impact a specific organization. Not Much Beneficial for Poor Countries 3. International trade allows countries, states, brands, and businesses to buy and sell in foreign markets. For more on how trade fits into the economy, see. The developing or less developed nations tend to rely on the developed countries for almost everything that they need in their respective countries. Here Are the Disadvantages of International Trade 1.