The Importance of International Trade

The Importance of International Trade

Economics deals with the proper allocation and efficient use of scarce resources. International economics is also concerned with allocation of economic resources among countries. Such allocation is done in the world markets by means of international trade. Under the concept of free trade, the best products are produced and sold in a free competitive market. Such benefits of production efficiency like better quality and lower price are available to all peoples of the world.

One fundamental principle in international trade is that one should buy goods and services from a country which has the lowest price, and sell his goods and services to a country which has the highest price. This is good for the buyers and for the sellers. Another, with free trade, the less developed countries have the opportunities to accelerate the pace of their economic development. They can import machines and adapt foreign technology. They can send their scholars and technocrats to more progressive countries to gain more knowledge and skills which are relevant to the particular needs of their developing economies.

In the final analysis, no country in the world can be economically independent without a decline in its economic growth. Even the richest countries buy raw materials for their industries from the poorest countries. If every country produces only for its own needs, then production and consumption of goods would be limited. Clearly, such situation hampers economic progress. Furthermore, the standard of living of the people all over the world would have no chance to improve. Because of international trade, people with money can acquire goods and services which are not available in their own countries. Hence, satisfaction of consumers can be maximized.

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