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Exploring the Background, Advantages, and Disadvantages of International Trade

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Exploring the Background, Advantages, and Disadvantages of International Trade

Introduction

International trade is a critical component of the global economy and has both advantages

and disadvantages. The exchange of goods, services, and capital across national borders have

been a critical factor in promoting economic growth and competitiveness (Carayannis et al.,

2019). With advances in transportation and communication, international trade has become

increasingly accessible and widespread, creating opportunities for economic growth and

development. However, it has also led to job loss and wage stagnation for certain workers and

industries. The unequal economic development among developed and developing countries has

also been a concern (Le Caous & Huarng, 2020). This essay will explore the benefits and

drawbacks of international trade and provide a well-developed thesis statement that reveals the

main arguments. Although international trade has a long and complex history and many

advantages, such as increasing economic efficiency and competitiveness, it also has drawbacks,

including job loss and wage stagnation for certain workers and industries and unequal economic

development between developed and developing countries.

Background information

International trade has a long and complex history, dating back to the ancient civilizations

of China, India, and the Mediterranean. Over the centuries, international trade has undergone

many changes and transformations, from the medieval trade routes and mercantilist systems of

the 16th and 17th centuries to the rise of globalization and free trade in the 20th and 21st

centuries (Campling & Colás, 2021). Today, international trade is a vital component of the

global economy, connecting countries and businesses worldwide and facilitating the exchange of

goods, services, and capital. The globalization of the world economy and advancements in
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transportation and communication technologies have significantly increased the volume and

complexity of international trade in recent decades. The World Trade Organization (WTO) was

established in 1995 to promote free and fair trade between its member countries and to provide a

forum for negotiating and implementing trade agreements (Hoekman & Mavroidis, 2021).

Today, international trade is governed by a complex web of agreements, treaties, and institutions,

including the WTO and regional and bilateral trade agreements. Despite its significance,

international trade remains a controversial issue, with debates and discussions surrounding its

impacts on employment, wages, and economic development. In this context, it is important to

understand the background and evolution of international trade and the factors that shape its

current form and future trajectory.

Advantages of International Trade

International trade has several benefits that contribute to increased economic efficiency

and competitiveness. Firstly, international trade allows countries to specialize in goods or

services they can produce at lower costs and trade with other countries for goods they cannot

produce as efficiently. When countries trade with each other, they benefit from increased demand

for their products and services, leading to increased investment and job creation. For instance,

Mexico's growth has been fueled by its trade with the United States, which has led to the creation

of new jobs and the expansion of the Mexican economy. Hence, international trade increases

overall economic efficiency as countries can produce and consume goods and services at a lower

cost. The World Bank found that economies with more access to global markets expand more

quickly and alleviate poverty more successfully (Lwesya, 2021). Additionally, international trade

increases competitiveness by exposing businesses to a broader market and new customers,

increasing sales, market share, and profits. By exporting goods and services to other countries,
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businesses can access new markets and expand their customer base, increasing their

competitiveness in the global marketplace. This, in turn, leads to lower prices for consumers, as

businesses are forced to lower costs to remain competitive. For example, countries like China

and India have grown rapidly by exporting their products to the developed world, thereby

increasing their competitiveness and driving down prices for consumers. This increased

competitiveness can spur innovation and efficiency improvements as businesses strive to remain

competitive in the global marketplace. According to a research by Arias-Vargas, Ribes-Giner,

Garcés-Giraldo, and Arango-Botero, companies that participate in global trade are more likely to

innovate and generate more than those that just operate inside their own nation (Arias-Vargas et

al., 2022). In summary, international trade may boost economic efficiency and competitiveness

by exposing enterprises to new markets and consumers and enabling nations to specialize in

commodities and services they can produce effectively. In addition to these advantages, research

and studies have shown that international commerce contributes to economic growth and

development.

Disadvantages of International Trade

International trade also has several drawbacks that can lead to job loss and wage

stagnation for certain workers and industries, particularly in developing countries where jobs

may be outsourced to countries with lower labor costs. As companies seek to lower costs and

increase competitiveness, they may move production to countries where labor is cheaper,

resulting in the loss of jobs in the home country. This has led to concerns about the decline of the

manufacturing sector in developed countries, as many companies have relocated their production

to developing countries where labor is cheaper. Globalization and growing competition from

lower-wage nations may put downward pressure on salaries and employment levels for particular
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workers and sectors in developed countries, in accordance with a research from the Organization

for Economic Cooperation and Development (Evans & Spriggs, 2022). This can result in job

losses and wage stagnation for workers unable to adapt to the changing economic conditions.

Furthermore, international trade can contribute to unequal economic development among

countries, as developed countries may have a significant advantage in terms of resources,

technology, and market access. For example, developed countries often have the upper hand in

international trade, as they have a stronger economy, better infrastructure, and greater access to

capital. This can lead to a widening of the wealth gap between developed and developing

countries, resulting in economic imbalances. In addition, this can result in developing countries

being unable to compete in the global marketplace and perpetuating the cycle of poverty and

underdevelopment. Based on a research conducted by the United Nations Conference on Trade

and Development, trade liberalization may impair the economy of developing countries in areas

where they have a competitive edge (UNCTAD, 2020). Jiang and Jia (2022). Generally,

international trade may result in uneven economic progress between developed and developing

nations, job loss, and pay stagnation for certain groups of workers and sectors within developed

countries. Research and studies back up the unfavorable effects of international commerce on

employment and economic growth, confirming the validity of these downsides.

Conclusion

International trade is a complicated problem with both benefits and drawbacks. On the

one hand, international trade has the potential to boost economic efficiency and competitiveness

by enabling nations to specialize in commodities and services that they can produce effectively

while also exposing enterprises to new markets and consumers. International trade, on the other

hand, may result in job losses, pay stagnation for particular workers and sectors, and uneven
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economic progress between rich and developing nations. It is critical to balance the advantages

and negatives of international commerce, as well as its effects on various areas, sectors, and

people. A well-thought-out and implemented trade strategy may serve to alleviate the negative

effects of international trade while also supporting economic growth and development. Policies

that encourage worker retraining and education, as well as efforts to address the uneven

distribution of trade advantages and costs, may all assist to guarantee that the benefits of

international commerce are evenly distributed. In conclusion, international commerce is a

complicated subject with major ramifications for economic growth, development, employment,

and wages. A comprehensive study of the benefits and drawbacks of international trade, as well

as the development of suitable trade policies, may guarantee that the benefits of international

trade are evenly distributed and the bad consequences are avoided.
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References

Arias-Vargas, F. J., Ribes-Giner, G., Garcés-Giraldo, L. F., & Arango-Botero, D. M. (2022).

Competitiveness of Rural Enterprises run by millennials in Antioquia. Revista CEA,

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Carayannis, E. G., Acikdilli, G., & Ziemnowicz, C. (2019). Creative destruction in international

trade: Insights from the quadruple and quintuple innovation helix models. Journal of the

Knowledge Economy, 11(4), 1489–1508. [Link]

Evans, J., & Spriggs, W. (2022). The great reversal: How an influential international

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Le Caous, E., & Huarng, F. (2020). Economic complexity and the mediating effects of income

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Lwesya, F. (2021). SMEs’ competitiveness and international trade in the era of global value

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