International trade is incredibly important for accelerating the development of the various countries on our planet, as well as optimizing the production of resources worldwide. The advantages of international trade are numerous, while its disadvantages are almost nil if viewed objectively (and not just from a specific point of view).
Basically, international trade forces product and service companies to increase their competitiveness, since not only will they have to compete with other domestic companies, but also a lot of new competition will appear from other countries that could have certain strategic advantages. Sooner or later, if a company offers better services or products, international trade will eventually make that product a leader, except in countries where legislation prevents it (with customs taxes, for example).
Advantages of International Trade
- It promotes competitiveness among companies around the world, which generates an increase in the quality and productivity of the services offered by the companies that become leaders.
- In the medium term, it causes each product to be manufactured, designed, or developed in certain specific locations, thanks to strategic advantages, higher quality, or better value for money, among others. This is very beneficial, as it also increases overall productivity at a global level.
- Favors specialization, since even if a product is designed in one country, it can subcontract parts or services to other foreign companies. A clear example is cell phones, around which many companies orbit that are dedicated to manufacturing specific parts that will then be used by another company in its final product.
Disadvantages of International Trade
Theoretically speaking, international trade should not harbor any disadvantages, as it is always conducive to the best product for the customer coming out as the winner, but this is not always the case:
- The jurisdiction of countries can have a negative impact on e-commerce and thus on the quality of the product that users receive. By means of customs duties, a country can protect its national companies, in order to make it more profitable for the average user to go with a national company.
- International trade can hurt a domestic company in the short term if it is not ready to compete with its international counterparts, which is why nations impose taxes when importing products from other countries. This decision may seem smart, but from the user’s point of view, this only prevents them from getting the best possible product at the best possible price.
- If basic human rights are not respected, which can happen in certain cheap labor countries, it can create a kind of “slavery” from one country to another. Usually international trade tends to make the majority of countries that do things right grow, although it is inevitable that some abuse certain advantages to take advantage of the situation, creating negative situations.