International trade is one of the pillars of the world economy. In this article we will see extensively what international trade is and how it affects us all day by day.
In the last 200 years, international trade has been an engine of growth for the world. Large companies have grown and other countries have prospered from exports and import China.
Before continuing with this post we would like to invite you to see our online import and export courses, there you will learn more about what international trade is and its processes:
International trade, Foreign Trade or International Business
There is a lot of confusion about it, but after much discussion among the experts, the consensus is as follows:
- The international trade is a global concept that incorporates imports and exports of goods and services worldwide. It is a term that has more relevance to economics.
- The foreign trade is a concept used in countries to determine their commercial policies. Generally speaking, the exchange of products or services is bilateral or trilateral.
- The international business makes companies and physical persons, when exported or imported products worldwide. A more business concept.
Below you can see a video from our YouTube channel that specifies this concept a little more:
International Trade?
The international trade refers to all commercial activities that have to do with the transfer of goods, resources, ideas, technologies and services across different countries and markets (part of the economy).
It is done using currencies and is subject to additional regulations established by the participants in imports and exports, as well as the governments of their countries of origin.
By conducting international business operations, the countries involved benefit each other by better positioning their products, and entering foreign markets.
It not only involves the products, but also the services. In fact, the products that have the most impact on international trade are: oil (and energy), automobiles, chemicals and drugs, textiles, cell phones (and communication products) and food. These industries are part of 70% of world exports and imports.
Importance of International Trade
International trade has transformed the world as it has enabled various countries to exchange valuable goods.
From the times of the "silk road" to globalization, the importance is:
- It makes the exporting countries grow . A clear example is Germany and China, which have boosted their economy with exports of all kinds.
- They bring new products to the countries . Spices are the perfect example, since they come from Morocco, India and the Middle East, they have allowed to enrich the gastronomies of the world.
- It improves the conditions for the final consumer . Trade, in the long run, makes companies that produce higher quality and in some cases lower costs survive. This causes the final consumer to have the freedom to choose what they prefer.
And of course, participation in international business has allowed countries to take advantage of their comparative advantage.
What is comparative advantage?
Comparative advantage occurs when a nation that has one or more advantages over other nations, that is, greater accessibility to resources or surplus labor, economics can also be considered among the comparative advantages.
In this way, the concept of comparative advantage means that a nation can export what it has in abundance to satisfy some deficiencies or increase its economic stability and in turn satisfy the deficiencies of other nations.
Also, companies with strong capital may look for a country that is abundant in land or labor (or large companies) to invest internationally when their local market becomes saturated.
Global competition encourages companies to be more innovative and efficient in the use of resources and it also increases competition in domestic markets not to mention introducing new opportunities for foreign markets.
And obviously for the inhabitants there are also benefits; international companies present them with a variety of goods and services. A large part of citizens improves their standard of living and increases their exposure to new ideas, products, services and technologies.
Here are some examples:
Example 1. International trade in textiles
Textiles are a very important part of the economy. Since they are imported and exported to make clothes, it is one of the most sustainable businesses.
Currently, China, India and the European Union control 67% of the market, with more than 80% of fabric exports. While the largest importers of fabrics are China, the United States and the European Union.
Example 2. International automotive trade
As I told you at the beginning, the automotive industry produces between 4% and 10% of the global economy. Currently, some countries produce parts, others assemble and others import vehicles.
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