Positive Impacts of International Trade

Impactions of International Trade Student’s Name Institutional Affiliation Impactions of International Trade Introduction Trade has proven to be a significant contributor of economic growth within countries. International trade has also helped to increase productivity and raise living standards within the participating countries. International trade has greatly contributed to globalization as countries strive to create a global community. There are several benefits as well as negative impacts that have resulted from international trade. Trade has contributed to advancements in technology across underdeveloped nations and the production of quality products due to the competitive foreign markets (Dahlman, 2006). Several factors such as political issues and restrictions by governments has limited foreign investors from venturing into different sectors across nations. However, these limitations have not affected the increased revenues generated from international trade. Now more than ever, countries have set up policies and reduced restrictions to encourage other countries to conduct business in an effort to boost their economy. As a result, international trade has contributed to the spread of technology and innovation across developing countries as well as increased productivity. Nonetheless, as underdeveloped countries create policies that favor international trade, developed nations have set up policies that limit underdeveloped nations to trade in their own competitive sectors such as agriculture. Such policies limit the impact of international trade, especially in underdeveloped countries. Positive Impacts of International Trade As stated, international trade has benefited most participating countries. However, the level at which these countries benefit varies depending on their capabilities and level of development. Increased Productivity One major benefit of international trade is increased productivity due to comparative advantage. Ricardo explained the importance of two countries benefiting from specializing in one product rather than competing for markets for similar products (Obstfeld, 2016). Moreover, the competition and interactions between traders in the foreign markets encourages the sharing of different production techniques and ideas to help improve productivity. The competition between foreign markets forces countries to improve the quality of their products by raising quality and efficiency. Raised Living Standards Most goods or services that are offered by foreign countries are cheaper compared to locally available products. Whenever local companies buy products from foreign markets, they improve the living standards of both countries. Although local producers may reduce their sales, the profit gained by foreign producers outweighs the losses incurred by the local producer. By encouraging international trade, countries are able to purchase cheap but high-quality products from foreign industries which will increase sales within the country, improve the economy and raise living standards. Eradicate Seasonal Downtime Encouraging international trades helps companies to counter seasonal cycles on specific products such as fruits and vegetables (Huang, 2004). Whenever a country undergoes a seasonal downturn in its products, other countries might be undergoing an upturn cycle on the same product. Local markets can therefore buy products from these countries to maintain their market. Additionally, countries that experience shifts in production and marketing can also interact with countries that do not face similar circumstances to provide a safety net in case of a downturn. Negative Impact of International Trade Despite its advantages, international trade has also contributed to several negative impacts that mostly affect developing countries. Inequality Inequality should be regarded as the most significant negative effect of international trade. Reason being inequality occurs for both companies in the country and the citizens. Although countries might experience economic growth as a result of trade, the benefits of such growth are not equally distributed within the country. The uneven distribution of income within most developing countries has led to more people becoming poorer while others gain more wealth (Obstfeld, 2016). Although countries might experience a growth in GDP, citizens of these countries might face reduced living standards. These situations are common in countries that have inappropriate policies that help re...