Question

Do both trading nations always secure more or less equal benefits by engaging in international trade? Discuss your answer.

Once trade opens up between two nations, what are the consequences of trade expansion on prices of the exported items and the imported item? Discuss your answer.

Answer 1

International trade refers to the exchange of goods and services between countries. Both trading nations always secure more or less equal benefits by engaging in international trade. Both the buyers and sellers benefit from international trading.

Consumers in the countries access to a larger variety of goods and services. Moreover the countries will have the whole world as their marketplace, not just one economy. They will get the benefits of economies of scale. International trade facilitates economic growth and a rising standard of living. Thus both the parties benefit from global trade. It is a positive-sum game, not a zero-sum game. International trade allows countries to expand their markets.

International trade leads to competition from imported goods in the domestic market. This will force the domestic companies to provide incentives and to keep improving the quality of their goods while keeping prices low. Then the competitive market will results in more competitive pricing and quality goods and services.