Trading between nations

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Trading within one's own country (domestic trade) is inherently separate from trade with countries, and is often referred to as foreign trade. That is due to the free movement of factors of development within a nation or state's regions, while labor and capital appear to be immobile within countries (Berna et al., 2008). Furthermore, there cannot be a full transition of international wage inequalities as well as factor price disparities. In international trade, the issue of balance of payments is more persistent than in domestic industry. Furthermore, the differences in the natural resources make countries to specialize in the production of goods and services in which they a comparative advantage which leads to the differences in the trade (Pradeep, 2016). The geographical and climatic conditions of a given nation may be different from another. Thus one may not carry out business with members from other countries the same way it could happen in the countries of origin. The different habits, language, usage, and taste in the international markets leads to a variance in the conducting interregional and trade between nations (Henry, 2009). The different currencies and the changes in the currency value also contribute towards such fundamental difference between domestic and international trade. Other reasons that cause the disparities include the differences in the political groups and the distinction in the national policies such as the artificial barriers that deter free movement of goods and services between nations.

Impact of international trade on a country

Through international trade, a country can enhance optimal utilization of its resources as it shall focus on production of the goods and services in which it has a comparative advantage (Agarwal, 2016). For instance, most developing countries specialize in agricultural activities as they import machinery and equipment from developed nations such as those in the US and UK. It also encourages large scale production as a country can dispose of the surplus hence avoiding wastage. Moreover, there is the stability of prices and increases efficiency. For instance, the stiff international competition compels manufacturers in a given state to improve on quality as well as minimizing costs as a way to benefit consumers worldwide. This kind of trade also leads to the development of infrastructure and communication (Sunanda, 2010). For example, perishable products require air transport which compels countries to establish airlines and ports to enhance such faster transportation. It also helps a nation to face the natural calamities effectively by importing products during the periods of supply deficiency.

Despite the above benefits, international trade may cause more harm to a country in several ways. It results in economic dependence as the underdeveloped countries shall rely on developed nations. As a result, there will be economic exploitation (Lamaj, 2015). For example, the European countries are exploiting Africa and Asia. Also, there is an impediment to a country’s growth and development due to the threat faced by infant industries that face stiff competition which eventually leads to their collapse. Other harms include hardships during times of war, importation of harmful products, inappropriate utilization of the natural resources that result to the economic downfall, and endangering the internal peace as foreign people enter a nation with evil ambitions other than trade (Larry et al., 2012).

The government should encourage international through elements such as free trade agreements since it promotes innovation as there will be free circulation of ideas between members of different countries (Eiras, 2004). Additionally, it offers the consumers to make personal choices and identify best opportunities which can improve the standards of living. Specialization and free trade will thus lead to increasing competitiveness of a country and new technologies. As a result, there will be more production, less pollution, a broad range of investment opportunities, and cure of more diseases as well as improved education (Froning, 2000). Henceforth, a country can record high economic growth and better living standards for its citizens.

When governments use trade restrictions such as the quotas, tariffs, licensing and embargoes to protect the early-stage domestic industries from the international competition. Moreover, it becomes easier to achieve in national defense in supporting and securing domestic production of the critical products in case there is a conflict (Jing & Yuduo, 2011). It also encourages the creation of robust employment opportunities through support of the consumption of the domestic goods. The government also use such restrictions to mitigate aggressive trade practices as well as the environmental concerns. Therefore the government should promote the international trade but impose the restrictions when necessary to protect its nation.


Agarwal, R.C. (2016). Advantages and Disadvantages of International Trade. Retrieved on 20April 2017

Berna, T., Semra, O. & Emin, C. (2008). The relationship between international trade andnational competitiveness.

Eiras, A. (2004). Why America Needs to Support Free Trade. .

Froning, D. (2000). The Benefits of Free Trade: A Guide for Policymakers. Retrieved on 20April 2017

Henry, T. (2009). International Economics: Global Markets & International Competition. RiverEdge, NJ, USA: World Scientific Publishing Company, Incorporated. pp111.

Jing, M. & Yuduo, L. (2011). Free Trade or Protection: A Literature Review on Trade BarriersResearch in World Economy Vol. 2, No. 1.

Lamaj, J. (2015). The impact of international trade and competition market on developingcountries

Larry, S., Mike, W., Warren, T. and Hal, H. (2012). Local impacts of international trade.

Pradeep, S. (2016). What Is the Difference between National and International Trade?Explained!

Sunanda, S. (2010). International Trade Theory and Policy: A Review of the Literature

November 23, 2022

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