Gains from International Trade

Gains from International Trade

International trade helps a country to export its surplus goods to other countries and secure a better market for it. Similarly, international trade helps a country to import the goods which cannot be produced at all or can be produced at a higher cost. The gains from international trade may be categorized under four heads.

I. Efficient Production

International trade enables each participatory country to specialize in the production of goods in which it has absolute or comparative advantages. International specialization offers the following gains.

1.        Better utilization of resources.

2.        Concentration in the production of goods in which it has a comparative advantage.

3.        Saving in time.

4.        Perfection of skills in production.

5.        Improvement in the techniques of production.

6.        Increased production.

7.        Higher standard of living in the trading countries.

II. Equalization of Prices between Countries

International trade may help to equalize prices in all the trading countries.

1. Prices of goods are equalized between the countries (However, in reality it has not happened).

2. The difference is only with regard to the cost of transportation.

3. Prices of factors of production are also equalized (However, in reality it has not happened).

III. Equitable Distribution of Scarce Materials

International trade may help the trading countries to have equitable distribution of scarce resources.

IV. General Advantages of International Trade

1.        Availability of variety of goods for consumption.

2.        Generation of more employment opportunities.

3.        Industrialization of backward nations.

4.        Improvement in relationship among countries (However, in reality it has not happened).

5.        Division of labour and specialisation.

6.        Expansion in transport facilities.