Advantages of International Trade

The following are the major gains claimed to be emerging from international trade.

1. Optimum Allocation:

International specialization and geographical division of labour leads to the optimum allocation of world’s resources, making it possible to make the most efficient use of them.

2. Gains of Specialization:

Each trading country gains when the total output increases as a result of division of labour and specialization. These gains are in the form of more aggregate production, larger number of varieties and greater diversity of qualities of goods that become available for consumption in each country as a result of international trade.

3. Enhanced Wealth:

Increase in the exchangeable value of possessions, means of enjoyment and wealth of each trading country.

4. Larger Output:

Enlargement of world’s aggregate output.

5. Welfare Contour:

Increase in the world’s prosperity and economic welfare of each trading nation.

6. Cultural Values:

Cultural exchange and ties among different countries develop when they enter into mutual trading.

7. Better International Politics:

International trade relations help in harmonizing international political relations.

8. Dealing with Scarcity:

A country can easily solve its problem of scarcity of raw materials or food through imports.

9. Advantageous Competition:

Competition from foreign goods in the domestic market tends to induce home producers to become more efficient to improve and maintain the quality of their products.

1 Larger size of Market:

Because of foreign trade, when a country’s size of market expands, domestic producers can operate on a larger scale of production which results in further economies of scale and thus can promote development. Synchronized application of investment to many industries simultaneously become possible. This helps industrialization of the country along with balanced growth.


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