What is the role of international trade?

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International trade favors the free exchange of goods, services and capital between several countries. Trade is about improving the global economy, and ensuring growth for all countries involved. It is about creating economic, social and environmental benefits.

What is the definition of international trade?

In simple terms, international trade refers to the exchange of goods and/or services between several countries. These commercial exchanges can also take place between a country, or an economic area, and the rest of the world.

By choosing to pursue your studies in the field of international trade, you understand the role of such trade in the national and global economy. International trade is far from being a new trend, but its actors are continuously innovating it according to the economic needs.

Flows of market goods and services affect several sectors, including production, sales, imports, and especially exports. International trade also refers to the organization of trade flows, as well as to all the capital exchanged.

What is the role of international trade?

By focusing on large-scale trade, international trade ensures the improvement of the global economy. Thanks to this economic role, this type of trade contributes greatly to the development of each of the participating countries.

The exchange of goods and services between different countries always creates new economic opportunities. This is a growth opportunity for middle-income countries, as they can access the markets of rich countries. As for these developed countries, they have the possibility of maintaining or even improving their economic power through international trade.

What are the benefits of international trade for companies and countries?

The main advantage of international trade is the good influence on the competition. Exporting countries are obliged to improve the quality and volume of their production. They are also forced to offer competitive prices to win and to keep their production outlets. The resulting job creation is also important to their local economy.

The importing countries can choose their suppliers according to their convenience. They are generally based on their expectations in terms of quality, quantity, and also on their purchasing power. To this end, they make international trade profitable for their economy. Locally, a country that engages in international trade offers a wide choice of products to its consumers. The latter benefit from imported food products and standardized goods, such as imported vehicles and technological devices.

It is also important to know the role of international trade within companies. Some benefits include:

  • the limitation of production costs, thanks to the preliminary knowledge of the expectations of outlets;
  • the implementation of a relevant commercial strategy to manage price competitiveness;
  • the possibility of contributing to cross-fertilization between their country of establishment and a foreign country. In this case, the company imports and exports similar non-identical goods at the same time;
  • increase in annual sales, and improve their reputation on a national and international level.

Who are the main players in international trade?

In terms of total imported and exported goods, China, the European Union and the United States are the main players in international trade. They have been more active in world trade for over 15 years.

Japan also has its place in international trade, although it is becoming less busy than China and the United States, unlike before. Exports to China, Russia and Brazil have also been higher for almost 10 years, to the point of having a high coverage ratio.

What are the issues and challenges of international trade?

Trade between countries aims to reduce poverty and social inequality. In this sense, international trade promotes the free exchange of capital, goods and market services, the challenge being to control the interdependence of countries, due to globalization. States are required to facilitate free trade agreements by establishing simpler procedures and lowering customs duties.

Today, the major challenges of international trade can be summarized in three points: global economic growth, sustainable trade and respect for the environment. With these basic principles, each country must give priority to the exploitation of resources and raw materials already used, as well as to continuous production. It is a question of passing on the benefits generated to each household and individual.

How do governments and international organizations regulate and promote international trade?

Like any other development factor, international trade is subject to several rules. The World Trade Organization (WTO) is responsible for their application. This organization collaborates with many international governmental organizations to carry out its missions.

Through numerous institutional relationships, the governments and organizations involved establish specific economic policies. All diplomacy is based on the coherence in the implementation of strategies to be followed, which are more or less formal. The objective is to assist all countries engaged in international trade in the implementation of their strategies to ensure their economic growth.

Updated 20 April 2023