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INTERNATIONAL TRADE BY     TOLULOPE OMOTOYE

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INTERNATIONAL TRADE BY     TOLULOPE OMOTOYE

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- the answer to the question above lies in the link above as it breaks it down down to the advantages , division of labour and specialization as countries need to trade as all resources are not shared equally, and theres a need to balance it out as thats the only way development can actually occur . the page also highlights the point that many countries are needed in the production of certain goods, as some or many resources are scarce but with trade many goods can be made possible ,

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This video explains international trade very easily , as I focuses on its core definition and the exchange of goods and services between countries , countries could trade to balance out losses or for currency

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If you walk into a supermarket and can buy South American bananas, Brazilian coffee and a bottle of South African wine, you are experiencing the effects of international trade.

International trade allows us to expand our markets for both goods and services that otherwise may not have been available to us. It is the reason why you can pick between a Japanese, German or American car. As a result of international trade, the market contains greater competition and therefore more competitive prices, which brings a cheaper product home to the consumer.

What Is International Trade?

International trade is the exchange of goods and services between countries. This type of trade gives rise to a world economy, in which prices, or supply and demand, affect and are affected by global events. Political change in Asia, for example, could result in an increase in the cost of labor, thereby increasing the manufacturing costs for an American sneaker company based in Malaysia, which would then result in an increase in the price that you have to pay to buy the tennis shoes at your local mall. A decrease in the cost of labor, on the other hand, would result in you having to pay less for your new shoes.

Trading globally gives consumers and countries the opportunity to be exposed to goods and services not available in their own countries. Almost every kind of product can be found on the international market: food, clothes, spare parts, oil, jewelry, wine, stocks, currencies, and water. Services are also traded: tourism, banking, consulting and transportation. A product that is sold to the global market is an export, and a product that is bought from the global market is an import. Imports and exports are accounted for in a country's current account in the balance of payments.

Increased Efficiency of Trading Globally

Global trade allows wealthy countries to use their resources-whether labor, technology or capital- more efficiently. Because countries are endowed with different assets and natural resources (land, labor, capital and technology), some countries may produce the same good more efficiently and therefore sell it more cheaply than other countries. If a country cannot efficiently produce an item, it can obtain the item by trading with another country that can. This is known as specialization in international trade.

Let's take a simple example. Country A and Country B both produce cotton sweaters and wine. Country A produces ten sweaters and six bottles of wine a year while Country B produces six sweaters and ten bottles of wine a year. Both can produce a total of 16 units. Country A, however, takes three hours to produce the ten sweaters and two hours to produce the six bottles of wine (total of five hours). Country B, on the other hand, takes one hour to produce ten sweaters and three hours to produce six bottles of wine (total of four hours).

But these two countries realize that they could produce more by focusing on those products with which they have a comparative advantage. Country A then begins to produce only wine, and Country B produces only cotton sweaters. Each country can now create a specialized output of 20 units per year and trade equal proportions of both products. As such, each country now has access to 20 units of both products.

We can see then that for both countries, the opportunity cost of producing both products is greater than the cost of specializing. More specifically, for each country, the opportunity cost of producing 16 units of both sweaters and wine is 20 units of both products (after trading). Specialization reduces their opportunity cost and therefore maximizes their efficiency in acquiring the goods they need. With the greater supply, the price of each product would decrease, thus giving an advantage to the end consumer as well.

Note that, in the example above, Country B could produce both wine and cotton more efficiently than Country A (less time). This is called an absolute advantage, and Country B may have it because of a higher level of technology. However, according to the international trade theory, even if a country has an absolute advantage over another, it can still benefit from specialization.

Other Possible Benefits of Trading Globally

International trade not only results in increased efficiency but also allows countries to participate in a global economy, encouraging the opportunity of foreign direct investment (FDI), which is the amount of money that individuals invest into foreign companies and other assets. In theory, economies can, therefore, grow more efficiently and can more easily become competitive economic participants.

For the receiving government, FDI is a means by which foreign currency and expertise can enter the country. These raise employment levels, and, theoretically, lead to a growth in the gross domestic product. For the investor, FDI offers company expansion and growth, which means higher revenues.

SEE: The Importance Of Inflation And GDP.

Free Trade Vs. Protectionism

As with other theories, there are opposing views. International trade has two contrasting views regarding the level of control placed on trade: free trade and protectionism. Free trade is the simpler of the two theories: a laissez-faire approach, with no restrictions on trade. The main idea is that supply and demand factors, operating on a global scale, will ensure that production happens efficiently. Therefore, nothing needs to be done to protect or promote trade and growth, because market forces will do so automatically.

In contrast, protectionism holds that regulation of international trade is important to ensure that markets function properly. Advocates of this theory believe that market inefficiencies may hamper the benefits of international trade and they aim to guide the market accordingly. Protectionism exists in many different forms, but the most common are tariffs, subsidies, and quotas. These strategies attempt to correct any inefficiency in the international market.

The Bottom Line

As it opens up the opportunity for specialization and therefore more efficient use of resources, international trade has the potential to maximize a country's capacity to produce and acquire goods. Opponents of global free trade have argued, however, that international trade still allows for inefficiencies that leave developing nations compromised. What is certain is that the global economy is in a state of continual change, and, as it develops, so too must all of its participants.

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If you walk into a supermarket and can buy South American bananas, Brazilian coffee and a bottle of South African wine, you are experiencing the effects of international trade. International trade allows us to expand our markets for both goods and services that otherwise may not have been available to us.

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This video shows how the taught of exchange comes to mind , as the bearer of the minerals needs a new device , he then trades what he has which is at a higher value for cash profit , he can now afford to buy the item due to trade and demand of his mineral resources.

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This is basically international trade for dummies as it breaks down every point to the barest minimum , its basically explaining trade to the laziest person , enjoy the video .

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Imports, Exports, and Exchange Rates: Crash Course Economics #15

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International trade can be defined as the exchange of goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product.
at the end of this topic I hope to highlight the benefits of international trade .

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- this link above breaks down international trade for someone who has never heard of it before , it simply defines international trade as the exchange of good and services between countries ,which can help the country and can also cause change. the page also highlights the opportunity cost in producing goods as in the example given it shows that two countries can both save each other some times if they use their labour forces efficiently and just trade resources.

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Containers , these are used to ship goods from port to port , this container highlight the movement of goods as shipping plays a very big role in trade as it is the means by which goods get delivered. containers can either be moved through air or sea , sea is the most preferred option as it can carry more load , at a lesser risk.

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This image just highlights the good and services being moved from one place to the other . its a process that happens daily , trade never sleeps.

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This image symbolizes the partnership between corporate organizations worldwide, which come together to do business and trade services , all for developmental purposes of both nations.
Partnership invites bigger corporations to play roles in small communities as the partnership should be beneficial to the development of certain places in that community .