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What Is the Impact of International Trade?

Middle Eastern counties are dependent on revenue from international trade of crude oil and other natural resources.
International trade can provide financial resources to developing countries.
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  • Last Modified Date: 18 August 2014
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International trade is a trade that transcends international borders. This is in direct contrast to domestic trade, which is the trade that occurs within a territory or local market. International trade has been made possible by advances in technology that make it easier to communicate and coordinate the transfer of goods and services across territories. The impact of international trade can be seen in various areas including the economy, jobs, outsourcing and unfair labor practices.

One impact of international trade is its effect on the economy of the nations engaging in the trade. This effect is felt by both less developed and more developed nations. More developed countries benefit by purchasing raw materials and finished products from less developed countries. Less developed countries gain by getting much needed financial resources from the trade. For instance, some developing countries in Africa and the Middle East have some natural resources like crude oil, metals and precious stones that they can sell to other countries in exchange for financial resources. Indeed, the economies of some of these countries are dependent on the financial resources. Most developed countries that do not have resources like crude oil depend, to a large extent, on the supplies from these nations.

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International trade also has a strong effect on jobs in the more developed countries. Most companies now engage in outsourcing, which is a direct outcome of international trade. These companies prefer to hire workers from other countries who can do the same or more work as their local employees for a fraction of the cost. This reduces the number of jobs that are available to the local workforce. It may also lead to unfavorable competition in which the local workers are forced to compete with international workers from countries with lower standards of living who are willing to do the same job for far below the minimum wage.

This particular impact of international trade leads to the fears that some unscrupulous business associates might exploit cheap labor in a manner that is detrimental to the workers from poor countries. For instance, some western companies move their companies to some Asian countries with lax labor laws where they tend to exploit the local workforce by paying them very little compensation for hard labor. Some concerns also arise about the potential of using underage labor in the manufacturing sector, especially the apparel and toy-making sectors. This is an undesirable impact of international trade.

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Discuss this Article

anon350466
Post 7

I want to know what are the effects of international trade on businesses.

everetra
Post 6

@Mammmood - International trade, with its ups and downs, is a necessary evil in my opinion.

People like to decry things like the NAFTA trade agreement of the late 1990s. Yes, NAFTA caused jobs to be shipped to Mexico. But it caused those laborers to ship goods back to us at very cheap prices.

Did it improve our standard of living in the process? I think it did. Did we lose some jobs? I think it’s obvious. Sometimes you just have to pick your poison, while doing all that you can to make America as competitive as it could be.

Another option is for multinationals to pursue joint ventures, like Japanese manufacturers joining with American car makers to build plant facilities here in the United States.

Mammmood
Post 5

@SkyWhisperer - I doubt that would work. If you impose tariffs, you force us to make everything ourselves.

That may seem like a good idea but the costs of production would be higher for goods made in the United States than goods produced overseas.

If you really want to bring jobs back to the United States, in my opinion you need to slash the corporate tax rate. At 35% we have an extremely high tax rate compared to other nations. I have no doubt that if we slashed it to 20% or less many of these multinational companies would ship jobs back to the United States.

SkyWhisperer
Post 4

We have had a trade deficit with China for many years now and the trend shows no sign of abating. Whether it’s fair or not, that’s the way it is.

I think the U.S. should take stronger measures to save our manufacturing industry in the United States, which has been shipped overseas for the most part as a result of cheaper labor and not needing to pay healthcare benefits to their workers.

One way we can restore the strength of our manufacturing base is to impose more tariffs on international goods, making our own manufactured goods cheaper in the process. I am certainly not under the illusion that we will be able to do that with all sectors of manufacturing, but we should do it in as many industries as we can.

burcidi
Post 3

@turquoise-- I actually don't think that international trade is to blame. I don't think that there are any disadvantages of trade. Trade allows economies to grow and increases the welfare of society.

The ones to blame are governments of countries that refuse to implement ethical work standards on their workers. If there wasn't child labor, ridiculously low pay rates, unending work hours in these countries, trade would be a fair ground for all and Americans wouldn't be losing their jobs.

International trade is a great thing, it's how we are where we are today and it's how developing nations are making progress and developing their economies. If we need to blame something, it should be 'slave labor', not trade.

turquoise
Post 2

My husband lost his job due to outsourcing and has been unemployed for the past year. We are having trouble paying our mortgage and I make enough to just get by.

I can't say that I'm very supportive of our trade policies because of our personal problems. I think international trade has its benefits and costs and you can't have one without the other. I remember when US started importing Japanese cars, it was so exciting because many people were able to afford a car for the first time and unemployment decreased.

But now, we are experiencing the downside of trade which is the fact that labor abroad is more efficient and less costly than it is here. In fact, the downside is worse than the benefits of trade because if Americans don't have jobs and income, they can't purchase goods which we manufacture and import.

ysmina
Post 1

As a consumer, I enjoy the benefits of international trade. If we couldn't trade internationally, not only would the things I need to buy cost much more, but there would be very few or no options and variety. Many of the products I purchase for myself and my home are made in other countries and I would not want to switch to an American brand.

At the same time though, I think international trade is very unfair. Once, we were in a coffee shop with a friend who told me that the fancy fresh coffee beans I purchase from there doesn't really benefit the coffee farmers in Africa. They get paid in measly cents while we willingly pay $30 for a bag of it in the U.S. So most of the profit, in fact all of it, goes to the manufacturers, not the farmers who really need the money.

Whenever I buy coffee now, I feel very guilty and sad about it. I wish there was more equality and justice in international trade.

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