International Trade

International trade

International trade is the exchange of goods and services between countries (ref). It has become extremely important and without it - less economic developed countries for example would not be able to sustain themselves. This report will assess the benefits and drawbacks that international trade creates as well as the factors such as tariffs or quotas that stops it increase.

International trade brings many advantages to poor as well as rich countries, even though it has been argued that international trade help rich countries more than poorer countries, however; economists have found to be of an equal balance (ref).

Firstly, it helps boost the economy of countries specialising in particular goods by creating jobs (Anon., n.d.). Malaysia for example specializes in producing palm oil, accounting for 39% of the world’s total palm oil exported (Amir Mahmood, 2000). As other countries buy palm oil from Malaysia, demand is increased and as a result leads to more people needed for production which creates more jobs. This will lead to the multiplier effect as more people have jobs in the country, they would have more disposable income to spend which could help local businesses as well as the government through tax - reinvested back into the country to attract more investment. Malaysia is part of organizations such as APEC, ASEAN and the WTO (Amir Mahmood, 2000), which promote free trade for its members, it means that the country can export freely without the need to pay tariffs therefore gaining a competitive advantage over non-member countries specialised in the same industry as they would have higher selling price due to tariffs or quotas (example?).

Secondly, international trade attracts foreign investment (Anon., n.d.). As markets have become more competitive with consumers having a wider choice, multinationals companies which own or control production facilities outside the country in which they are based - look for the cheapest...