Advantages and Drawbacks of International Trade

Introduction

The development of international trade can be viewed as a part of ongoing globalization. This process seems beneficial from the perspective of greater opportunities for individuals and businesses around the world. However, the advantages of this field are inevitably accompanied by specific drawbacks deriving from the possible regulations of corresponding operations. Therefore, the progress in this area enhances the economic growth of participating countries and encourages the competitiveness of entities while being detrimental to small companies and implying the dependency of enterprises on external political affairs.

Advantage 1: Economic Growth

The first and most apparent benefit of international trade is the opportunities it provides for the economic growth of involved regions. This provision is explained by the fact that businesses boost their profitability through entering the global market as its operations’ scope cannot be compared with the results of similar occasions in the domestic market (“The Pros & Cons of International Trade”). In turn, local populations also benefit from thiese processes as they can choose from a greater variety of options. From this perspective, companies become more successful through expanding their target markets, and customers’ satisfaction significantly increases.

Advantage 2: Market Competitiveness

The second advantage, which is market competitiveness, derives from the above provision since the presence of a higher number of rivals leads to the need to monitor trends and keep up with innovation. In this case, not only companies but also buyers benefit from global competition. Thus, for example, the former has a chance to ensure the correspondence of their products to international standards (“The Pros & Cons of International Trade”). In turn, the latter have an opportunity to purchase goods at reasonable prices since they decrease as a result of businesses’ policies intended to attract more customers (“The Pros & Cons of International Trade”). Therefore, the overall economic growth is accompanied by competition with positive outcomes for all affected people and entities.

Disadvantage 1: Small Companies

Alongside the described benefits of international trade, there are serious disadvantages, and one of them is difficulty surviving for small companies. The difference in their position in the market compared to big enterprises can be explained by the lack of resources for global promotion (“The Pros & Cons of International Trade”). Consequently, their capabilities in terms of expansion are limited, and the economic territory, which they can enter, is insufficient for competing with others (“The Pros & Cons of International Trade”). This circumstance defines their increasing risks to go out of business.

Disadvantage 2: Dependency on Politics

The second factor, which adversely affects the results of operations of global enterprises, is their dependency on external conditions connected to political decisions of different regions. For instance, a business can be profitable, possess sufficient resources for growth and expansion, and successfully compete with others, but the introduction of any barriers by the governments might outweigh all the benefits (“The Pros & Cons of International Trade”). In this case, the companies depend on domestic and international policies, which present risks to all entities regardless of their position on the market.

Conclusion

In conclusion, the presence of advantages and drawbacks in international trade leads to the necessity to assess the market situation for its participants carefully. On the one hand, they can increase their profits and realign manufacturing processes in accordance with global requirements. On the other hand, the risks to fail are high because of the possibility of insufficient resources for promotion and the unpredictability of political changes. Thus, the described factors should be considered when analyzing opportunities in each individual case.

Reference

“The Pros & Cons of International Trade.” Environmental Conscience, 2020. Web.