Economics is the social science that analyzes the production, distribution, and consumption of goods and services.

Monday, 5 December 2011

Advantages of International Trade

Advantages of international trade.

International trade could be dispensed to three groups that are consumer, entrepreneurs and country.

A.           To consumer

                                 i.            Obtain goods that does not produced inside of their country

The country could not produce all goods because of availability various obstacles such as climatic differences, soil etc. As such, international trade enable one country obtain goods that does not are issued by the country. For example, Japan had no liquid natural gas could use resource that when running international trade with Malaysia. 

                               ii.            Offer various choice (substitutes goods)

Through international trade, there are variety of goods and services able to import. This can give various choices to users according to their taste and ability. For example, Malaysian can choose various types of cars, whether local model or import model. This wide choice will increase users’ standard of living. 

                             iii.            Obtain goods with the lower price

International trade encourages specialization. These specializations increasing skills and production efficiency and enable materials production mass-produced. Large-scale production enable producer to decrease price of goods and with better quality. 


B.           To entrepreneurship

                                 i.            Global Markets

International trade enable the exporter country to expand their supply.  It is because the international market is wider compared to the local market. More extensive market enable firm to acquire higher profit and further improving national income. 

                               ii.            Encourage technology usage

Through international trade, local manufacturer able to import machine and other modern tools to be applied in production process. Modern technologies enable to increase productivity and speed up development of local industry. 

                             iii.            Improving production efficiency

When one country do international trade, then the goods that produced by the country are available at its importer country. This competition would encourage manufacturer to produce goods with more quality and efficiently. As a result, competition can prevent monopoly firm from impose higher price. At the same time, competition can also encouraging research and development and accelerate the use of new technologies. 

                             iv.            Increasing employment opportunities

In the world with the growing economics, demand on exports increase from time to time. This would encourage manufacturer and foreign investor to expand their production scale. So, job opportunities can be created and unemployment problem in state can be reduced. 

 C.            To country

                                 i.            Encourage investment

When one country carries out open-economy policy, then that country can encourage entrance of foreign investment. Malaysia allows flow for foreign direct investment (FDI), especially in export sector because FDI can speed up economic growth. Besides that, Malaysia allows equity partnership with foreign investor like those occurring in car industry national and civil aviation. 

                               ii.            Trading partner

International trade can encourage understanding and cooperation between countries. This can create good relationship in terms of politics, social and cultural between trading country.