International trade has prospered over time due to the many gains it offers to different countries across the world. International or global trade refers to the exchange of goods, services and capital among different countries and regions, without a lot of hindrances. International trade comprises of a good portion of a country’s GDP and is one of the most significant sources of revenue for many developing countries. International trade system is currently growing and spreading quite fast due to the advancement in technologies, advanced transport system, outsourcing of services, rapid industrialization and the emergence of transnational corporations. The benefits of this trade are immense, and it would be difficult for countries if such trade did not exist.
One of the benefits of international trade relates to specialization. There are around 150 countries in the world, each of which has unique facilities or resources in the form of capital equipments, natural resources entrepreneurial ability and skilled labor (Carbaugh, 2010). International trade allows countries to specialize in the production of goods and services that they can afford to produce economically, sell them to other countries and import the goods and services they cannot produce economically.
International trade allows people all across the globe to access goods and services at relatively cheaper prices. Through specialization, countries are able to undertake large scale production of goods and services, which results in reduced prices. People from other countries are able to access goods that cannot be produced in their own countries due to resources limitations. This means that, through international trade, people have a wide variety of goods and services to choose from, even though such goods are not produced in their mother countries (Levi, 2009).
International and global trade opens up the entire markets in the world for goods produced in a particular country. Thus, by expending the size of the market, international trade becomes a crucial source of employment to thousands of people across the globe leading to a higher level of labor employment. For instance, India exports readymade garments worth Rs. 2000crores annually. This offers employment to thousands of designers, cutters, tailors, packers and women who can work from home. If there was not international trade, then the local market could not absorb the current production, resulting in loss of employment for the people in the industry.
International trade is particularly crucial in transfer of technological knowhow and transfer of capital. This transfer enables rapid economic development in developing countries and alleviation of mass poverty in such countries. Many multinationals are setting branches and acquiring subsidiaries in developing countries as they look for new market for their product and diverse their investments. As they do this, they transfer capital and technological knowhow from their developed countries to the poor developing countries (Carbaugh, 2010). Consequently, such countries get the chances of sharing the benefits of high production levels in developed countries. At the same time, local people get employment from such multinational companies, which operate under new and advanced technological levels. Such people benefit by gaining technological expertise, which can be useful in other domestic industries.
International trade also promotes efficiency in production, since most countries will adopt better and improved production methods to keep costs of production down and remain competitive. As countries employ better production techniques, the quality of goods and services goes up, which ensures that customers access high quality goods and services.
The spur of foreign competition will encourage domestic companies to improve the quality of production thus forcing them to increase production efficiency. Most imports from developed countries are of high quality owing to the fact that the level of technology in such countries is remarkably high. For domestic countries to be able to compete effectively with such goods and services, the local industries have to invest in technology and high production techniques, which improves production efficiency and stimulates economic development.
Promotion of world peace and co-existence is a crucial gain of international trade. Buying and selling of goods and services among nations makes such nations dependent on each other. There is no single country that is self sufficient economically and countries depend on each other to acquire the goods and services they cannot produce economically. This promotes mutual respect and dependence among different countries across the world (Levi, 2009).
The benefits of international trade are numerous and cannot be exhausted in this paper. Among the benefits, however, are increased levels of income, increased efficiency in production, accessibility to a wide variety of goods and services, massive transfer of capital and technological knowhow and increased mutual respect among nations.