International Trade/Global Finance

ADVANTAGES OF INTERNATIONAL TRADE

The impact of international trade in the lives of peoples and nations is already
well-known. We are so accustomed to the benefits of international trade that we never think of it as anything but natural.

Some of the important ones are:

1. International trade gives rise to improve production and specialization
through geographical division of labor.

As nations of the world are endowed differently from one another with respect to the distribution of natural resources, population, skills and aptitudes, talents and attitudes, each nation tends to produce from a given quantity of productive resources a larger volume of goods which she finds profitable.

In the process, nations find it to their advantage and interest to specialize
resulting in a geographical division of labor.
However, needless to state, improved production and specialization through geographical division of labor
is impossible without trade.

Under conditions of freer international trade, nations are able to exchange goods with those of other nations. Cordell Hull, speaking on this particular point, said:
“For generations, humanity has built its life upon lifeblood of economic activity. This is equally true whether within or among nations. Each nation accordingly has developed far beyond domestic requirements those branches of production in which it has special endowment or aptitude . . .”

Little imagination is required to conceive of a society without division of labor.

2. International trade helps to assemble the things each nation needs.

As you take your seat at the breakfast table, have you paused even briefly, not only to give thanks for the many things that appear before you, but  to take stock and think how they have become a part of your daily life?

The average consumer must have taken the position all too commonly assumed that the “pan de sal” which graces the breakfast table of the Filipino family comes from the bakery shop, cheese from the grocery store, the newspaper from the publishing house and others.

However, what escapes the minds of most of us is that “pan de sal” is made and baked out of wheat flour which is imported from abroad, principally from the United States and Canada; that the cheese comes from Holland; and that the newspaper comes from the newsprint imported from Canada; that the jeepney is product out of parts manufactured in the United States; and many others.
This elementary lesson is however oftentimes overlooked.

3. It helps raise people’s standard of living.

If it is correct to assume that, through international trade, a nation can obtain the many things which she needs but could not produces at lower costs, then, it is also logical to expect the good effect of trade upon the standard of living of the people.
For countries dependent upon international trade for raw materials, capital equipment, or consumption of goods not produced domestically, gains through international trade could be considerable in magnitude.

In the case of the United States, for instance, this wealthy country can
undoubtedly give up the importation of many items which represent the exports of many countries of the world.
But such a situation will mean a consequent lowering of the standard of living of her people.

Briefly, it can be said that international trade provides the means of maintaining high level of employment in industrial nations as well as high standards of living.

4. It serves as vehicle for alleviating the economic difficulties that attend
congested regions of the world.

Through international trade, countries which are densely populated and
handicapped by limited food resources can get their supply by exchanging
their manufactured products for food.

Thus, Japan, a typical example of a
country which suffers from dense population and scarce food resources, has to depend heavily upon international trade for the food requirements of her
enormous and rapidly increasing population.

Apparently, a world in which all countries could carry on international trade freely under international regulation would be less likely to produce conflicts and chaos than a world in which each nation, through its governmental control of foreign trade, competes with every other nation for the most favorable bargain.

5. Exchange of goods tends to increase the total utility of the goods entering
the transaction.

It is self-evident that if goods remain in regions where they are produced in account of their failure to enter the stream of commerce and trade, only inhabitants of such regions would benefit from their production.
Trade has contributed to the widespread benefits arising from exchange.

6. To the economic benefits we derive from international trade, cultural
advantages may be added.

The frequent intercourse fostered by trade has not only maximized the
advantages of production and specialization, but at the same time has contributed to mutual understanding of the ways of life, customs, philosophies
and traditions of people.

This mutual understanding contributes greatly in turn to better respect, promotion of good-will, and a feeling of brotherhood among men, thus insuring peaceful relations among the peoples of the world.

As such, international trade serves not only as a medium of cross-cultures but also as a strong link between the activities of peoples in all parts of the world.

Equality of trading opportunities of nations should at all times be a
goal of nations if there is to be security and prosperity.