Free trade implies absence of quotas, tariffs, and other governmental barriers. It improves economic welfare of nations involved in international trade. Furthermore, free trade allows each nation to specialize to produce specific commodities it can manufacture efficiently and cheaply compared to other countries. Unilateral free trade, for instance, allows countries to reap the benefits as well as returns of free trade right away.
Therefore, countries should undertake unilateral reforms to avoid or mutually reduce domestic barriers to international trade. International trade policies comprise bilateral and multinational arrangements between nations. These policies dictate the terms of trade between nations in the global markets. International trade policies are particularly of utmost concern to Less Developed Countries LDCs because they determine the terms on which such countries will participate in the global market.
Free trade policies, for instance, eliminate barriers to commodities essay on quakers and traded by the parties, thus opening up markets. A multinational trade agreement is arguably the best outcome of various trade negotiations involving major trading nations or territories. GATT was set up in by major countries such as the United States in the wake of the global wave of protectionism.
GATT significantly reduced tariff barriers among industrial countries particularly on manufactured goods. International trade and their consequential policies improve and facilitate international relations, trading, technology sharing, consumption and real income of countries involved.
International trade represents a considerable share of GDP in most states as well as countries globally. The behavior and motivation of countries or corporations involved in international trade do not change significantly compared to domestic trade.
Evidence shows that there are a lot more Multi-national companies today than there were about two decades back. This is another reason for increase in International trade. Multi-national companies generate revenues in more than one country, as a result of which, this adds up to the International trade for a country.
International trade also happens because of competitive advantage of a country Country A to produce a product in a cheaper way than the other Country Country B. In such a case, Country B can import the product manufactured by Country A, and utilize its resources Which are fixed in the short run to manufacture a product that it could produce in a more efficient way than country A.
This way, both the Countries are utilizing their factors of production in an efficient way. International trade helps in increasing revenues for a company. If there was no international trade, the revenues for the company would be limited to its domestic revenues.
Looking into the big picture, a country with no international trade would have to live with goods produced in its country only.
Some countries like Saudi Arabia have only Oil as their resources. These countries import almost everything in exchange for Oil. Clearly, it would be difficult for such countries to sustain itself without international Trade. The main difference between International trade and domestic trade is that international trade is more expensive than domestic trade, because of imposing of external tariffs, and because of delays in transportation from one country to another.
Another difference that springs up is that Labour and Capital required to produce goods and services are not very easily transferable across international borders, as it would be to transfer them domestically. As a result, the International trade is confined to trading in goods and services, as against transfer of factors of production like Labour and capital.
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What is International Trade.
International trade is when countries exchange goods and services with one another. Usually each country will use money essay on international trade pay for the goods or services from the other country. Goods can be things like clothes, food, machine parts, or even things like furniture.
Services are tasks or jobs that one country does for another. For example, putting the small pieces of a doll together to make one whole doll is a service.