Question

discusses the importance of international trade to economic growth and development of the courntries. Using facts, data, and articles no older than a year.

Answer 1

International trade plays an significant part in each country's economy. It enables the needs of the population to be satisfied; stimulates the country's internal growth. Foreign trade is intercountry exchange in goods and services. Many economists had considered the issues of international trade. The Neo-Classicist leader E. Among these is Heckscher. According to him, foreign trade leads to an increase in the profits of the owners, due to the product's excess production and export factors, and promotes economic growth. International trade is seen as one of the key economic orientations of every world. International cooperation and the growth of globalization have a positive effect on the market economy. The consequences of these processes are the further incorporation of countries into foreign trade, which continues to play an increasingly important role in developing countries' economies. International trade between various countries is an significant factor in rising the standard of living, providing jobs and allowing customers to experience a wider variety of goods. International trade has taken place since the earliest civilisations started trading, but foreign trade has become particularly significant in recent years, with a greater share of GDP devoted to exports and imports.

There are the some reasons to make international trade important:

Comparative advantage

Comparative advantage theory notes that countries would specialize in certain commodities where they have a comparatively lower cost of opportunity. Only if one country is able to manufacture two goods at a lower absolute cost – this doesn't mean they can manufacture both. India could have a competitive advantage in labour-intensive manufacturing, with lower labor costs. Hence exporting these services and products would be productive for India. Though an economy such as the UK may have a comparative advantage in the production of education and video games. Trade makes specialization to the countries. Further info about how an economic welfare will improve the comparative advantage. Comparative advantage theory has drawbacks, but it does clarify at least some aspects of international trade.

Greater choice for consumers

New commercial theory puts less emphasis on competitive advantage and marginal cost of inputs. New commercial theory claims that a driving force behind trade in the real world is offering consumers a greater choice of differentiated goods. We import BMW cars from Germany because of the quality and brand image, not because they are the cheapest. Trade allows for the widest range of music and film to cater to various tastes. As the Beatles went on tour to the U.S. in the 1960s, it was selling British music-fairly unimportant labor costs. Perhaps the best example is of products such as shoes. Some clothing (e.g. value clothes from Primark – price is very important and they are likely to be imported from low-labour cost countries like Bangladesh. Yet we also import the Gucci (Italy) Chanel (France) designer labels. Consumers benefit from competition here, rather than the lowest price. Economists argue that foreign trade is mostly in line with the monopolistic market paradigm. The key thing in this model is label differentiation. We want to buy products with clear brands and reputations for other items. E.g., Coca-Cola ,macdonalds etc.

Specialisation and economies of scale – greater efficiency

Another part of the new trade theory is that what countries specialize in doesn't really matter, the important thing is to seek specialization and that enables businesses to profit from economies of scale that outweigh any other factors. Often, for no overarching cause, countries can specialize in specific industries – it may just be a historic accident. Such the specialization allows productivity to be increased. Multinationals also split the manufacturing chain into a regional distribution network for high-value added goods. For automotive manufacturing, the competitive process is often much more regional, for engines, tires, construction and marketing all theoretically originating from various countries. For example, Apple designs their computers in the US but contract the production to Asian factories. Trade enables a product to have multiple country sources.

Service sector trade

Trade appears to conjure up visions of physical products importing bananas, exporting cars. However, gradually, the economy of the service sector implies more intangible exchange – services like insurance, Financial services, and banking. Even when I render this website, I sometimes outsource IT services to developers in other countries. It may be for jobs as small as $50. Furthermore, I may export a revision guide for £7.49 to countries all around the world. A global economy with modern communications enables many micro trades, which wouldn’t have been as possible in a pre-internet age.

Global growth and economic development

International trade has been an important factor in promopting economic growth. This growth has led to a reduction in absolute poverty levels – especially in south east Asia which has seen high rates of growth since the 1980s.

TRENDS IN INTERNATIONAL TRADE

International trade relates primarily to physical products. Though rising, service trade accounts for a much lower share. World trade in products was estimated at over $17 trillion in 2017, while trade in services accounted for just over $5 trillion. Despite the global financial crisis, trade in goods and services rapidly bounced back to pre-crisis levels by 2011. In 2015 and 2016, the value of foreign trade in goods decreased significantly until it recuperated in 2017. Yet trade in goods remains below its point of 2014. During the same time the trade in services was more robust.

Values and growth rates of world trade in goods and service

International trade can be broadly distinguished between trade in goods (merchandise) and services. The bulk of international trade concerns physical goods, while services account for a much lower share. World trade in goods has increased dramatically over the last decade, rising from about $10 trillion in 2005 to more than $18.5 trillion in 2014 to then fall in 2016 and rebound up to $17.5 trillion in 2017. Trade in services greatly increased between 2005 and 2017 (from about $2.5 trillion to more than $5 trillion). The value of international trade of both goods and services declined substantially in 2015 and 2016 but have recovered in 2017 (Figure 1a). Following the strong rebound in 2010 and 2011, export growth rates (in current dollars) turned negative both in 2015 and 2016 (Figure 1b). They showed a strong bounce back to a positive territory – especially for developing countries goods’ exports – but remain below pre-crisis levels.

Since 2005 the volume of international trade of goods has increased dramatically. However, growth has slowed down significantly in the last few years and virtually stalled in 2015. Volume growth resumed in 2016 and further strengthened in 2017. In major economies, both imports and export recovered significantly compared to 2016.

Volumes of international trade in goods

The amount of foreign trade in products has significantly increased in the last 10 years (Figure). Following the 2009 financial crisis, the levels of trade in goods since 2009 have nearly doubled in developing countries as a community. Although import volumes for developing countries have risen relatively more than export volumes, the opposite has happened with respect to developed countries. The comparatively bigger increase in import volumes can be explained by the rise in market demand in developed countries. Growth in trade volumes has slowed significantly in the last few years, especially with regard to developing countries, before picking up again in 2017 when imports and export volumes for this group of countries rose at the highest rate since 2011. In the case of China, volume growth was negative in 2015, in terms of both imports and exports (Figure). Volume growth in 2016 was positive but for most countries only slightly so. In addition, volume growth rates in developed countries in the last two years have significantly outperformed those of developing countries. In 2017, imports and exports volumes growth in the United States and China recovered significantly, with the latter being in double digits. European Union trade performance was robust in line with the past years’ trends.