Positive Impacts of International Trade and Factors Driving International Trade – International trade is an activity of exchanging goods and services between countries. It develops because of cooperation between countries with the aim of promoting goods and services freely.
International trade within every country is important for economic prosperity. With the existence of international trade, indirectly one country with another will show economic competitiveness at the international level.
Basically, each country cannot meet its own needs, each country needs assistance and cooperation with other countries. This national trade is carried out to meet the needs of each country. Needs that must be fulfilled through international trade are needs that cannot be produced domestically, such as certain goods or services.
This international trade can not only be carried out between state governments, but between citizens or individuals in each country with other countries can also carry out international trade. For example, when we buy smartphones, vehicles, or other self-sufficient needs that are not provided domestically.
Positive Impact of International Trade
International trade has many positive impacts for every country that cooperates with other countries to export and import. This impact is not only for the government sector, but citizens are also positively affected. Here are the positive impacts of international trade.
1. Accelerating Economic Growth
The existence of international trade will have an impact on domestic industries in the form of encouragement to accelerate economic growth in a country.
With international trade, the demand for and supply of export products for other countries will increase, this will improve the country’s economy as well. For example the development of the textile industry, crafts, shrimp, coffee, rubber and others.
2. Sources of State Foreign Exchange
Foreign exchange is a source of foreign exchange as a means of payment for international trade between countries. Not all other countries’ currencies are declared foreign exchange, but only if these currencies are used as a medium of exchange for goods or services between countries.
Because with increased economic growth due to international trade, the country’s foreign exchange will also increase with international trade.
The country’s foreign exchange is obtained from various countries that buy products from a country. The foreign exchange is in the form of foreign currencies such as dollars, euros, yen and various currencies from other countries.
3. State Prosperity Increases
International trade makes economic activity increase, this can be an indicator that prosperity in a country also increases. The existence of this international trade makes prosperity for every economic actor in a country.
Economic actors are divided into producers and consumers. Producers will prosper if their profits increase by selling their goods and services to various countries with few tariff or non-tariff barriers.
As for consumers, they will prosper if they are able to get the goods they need that are not produced in their own country.
The government also prospered in this case because the country’s foreign exchange also increased due to this international economic activity. Sources of the country will increase if the value of exports is high.
4. Adding Employment
With increasing economic activity and the number of products exported in international trade activities, it appears that economic growth in a country has increased. This means that industries are increasingly labor intensive, therefore additional workers are needed to help industrial activities move more quickly.
To add to the workforce, jobs are opened for people in the country. Employment makes society prosperous. With the opening of jobs means reducing unemployment.
The industry will be greatly assisted and it is hoped that they will be able to produce better and better quality products so that they can compete with foreign products. Quality products will lure other countries to make transactions in international trade.
5. Interstate Relations
International trade has a positive impact on making close relations between countries, this can increase relations from one country to another. With this good relationship, it will not only benefit the trade sector, this will expand to other sectors as well to grow the country’s economy.
This relationship will lead to cooperation between countries in fields such as politics, culture, military, culture, education, and technology. The country will of course exchange values, knowledge, and goods to make the country grow even better.
6. Attracting Foreign Investors
International trade also has a positive impact in attracting investors from abroad to increase business capital so that the industry can grow even bigger. Investors are usually interested because they have previously conducted international trade and have contact with these investors.
With additional capital from foreign investors, economic growth in a country will increase. Another advantage will also be more job opportunities. This will have a huge impact on the economy.
7. The quality of production is getting better
The amount of competition in this world economy in the international world certainly encourages the industry to provide the best results for their products. With good product quality, the quantity of goods exported will increase because the products sell well in the international market.
Foreign investors also play a role here because they have already invested in the company. With additional capital, of course, the quality will be even better.
Thus a country will be able to compete with other countries. In order to compete, of course, the quality of the product must also be good so that it can be attracted by consumers from abroad. This must be supported by the use of new and more sophisticated tools than before so that the results will also be good.
8. Transfer of Technology
This international trade also has a role in technology transfer, especially from developed countries to developing countries. Countries that have made new technologies such as industrial machines, or personal technologies such as gadgets will be exported to countries that need these new technologies.
Thus all countries will experience the latest technological developments from this international trading activity. Developing countries can import technology from developed countries so that their countries are also growing with the presence of advanced technology.
9. Stabilize Prices
International trade indirectly controls the price of goods in the domestic market. The existence of international trade will not result in a shortage of goods because imports can be overcome to increase the stock of goods in the domestic market.
Vice versa, if a country has more goods so that prices do not fall, export activities can be carried out to reduce goods in the domestic market. With this the price will remain stable, and people will have no trouble getting it.
10. Advancing Financial Institutions
International trade has a positive impact on financial institutions, both banks and non-banks. International trade will continue to involve financial institutions to facilitate transactions. The more often this international trade runs, the more advanced the financial institutions in the country will be.
11. Created Country Specialties
Country specialization means that a country has a product that is a mainstay for export abroad. Other countries that import also believe that the products purchased are of good quality.
For example, Indonesia has a mainstay of rubber products to be exported to various countries, and most of the rubber in the world is produced by Indonesia. This will make other countries have loyal customers of products sold by a country. Other advantages can also increase a country’s income.
12. Fulfilling State Needs
At the beginning it was explained that a country certainly cannot live alone, other countries need to work together to meet the needs of their respective countries.
Not all countries have the same products or technology as other countries. With international trade, various countries that make transactions with the country concerned will have the same product.
What’s more, if that country cannot produce it, the best way is to import it from the country that makes the product. The results of these imports are of course to meet the needs of the country.
Factors Driving International Trade
In addition to the positive impact of international trade, of course there are driving factors that cause international trade. Here are the factors.
1. Technology Differences
Every country has differences in technology, especially developed and developing countries. There is a big difference between developed and developing countries in the field of technology. Developed countries annually issue a new variant of a technology. Meanwhile, developed countries generally always import from these developed countries. These factors drive this international trade.
2. Increasing State Income
This factor driving international trade is also needed so that the country always has income. With international trade, the country’s income will increase. State revenue can increase when there are export-import activities, the state will receive revenue from goods taxes. In addition, the state can also export state-owned goods.
3. Expanding the Market
The driving factor for international trade on this one is to expand the market. It is used to get big profits.
By expanding the market on a large scale and exporting it worldwide, of course, there will be more and more buyers. Some countries do this by introducing their products to the world in order to get the most profit.
4. Differences in Natural Resources
Every country has different natural resources. With this international trade, countries can exchange their natural resources with each other to meet the needs of their countries.
For example, Indonesia has abundant natural resource products such as coffee, rubber, palm oil, and others. Then Australia has cattle with better quality meat. Then it can be done export-import between countries. That is the driving factor of international trade.
5. Production Cost Savings
Not all countries can produce their own products. For countries that do not have the knowledge to make their own products, it will feel much more expensive to produce them if the country plans to produce them.
With international trade, countries that do not yet have the ability to produce certain goods will be facilitated by importing goods from other countries. This import will cost a little when compared to production costs.
6. Interstate Transportation
Today’s means of transportation are increasingly sophisticated and fast. Therefore, transportation between countries is a driving factor for international trade. It is no longer surprising that every community imports goods from abroad because transportation between countries is easy and fast.
Interstate transportation that can assist export-import activities includes land transportation (trains, trucks, etc.), air transportation (airplanes), and sea transportation (ships).
7. Increasing Local Products
The right step if you want to improve the quality of local products and known internationally. With this, producers must prepare domestic SMEs for product exports and get used to competing on an international scale.
The existence of domestic products that are successfully exported abroad will encourage other industries to improve the quality of their products so that they can also compete in the international market. This is one of the incentives to conduct international trade.
8. Climate Differences
The climate differences in each country certainly have differences. Some natural resources also depend on the climate of a country. Temperature, weather, and seasons can make different natural resources.
Not all plants and animals can live in all climates. Each climate has different plants and animals. This is the driving factor for international trade.
With international trade, each country can meet its needs that cannot be met by its own country. Only by importing do they get the desired product.
9. Differences in Community Tastes
Everyone has different tastes, but every country produces products that mostly have something in common. Because people want products that are different from domestic products, many people use foreign products.
Thus the state of course cooperates with other countries to bring in their products and operate within the country. This is done to meet the needs of diverse communities. This is one of the factors supporting the existence of international trade.
10. Interstate Cooperation
Another motivating factor is to establish cooperation between countries. With this international trade, countries will be closer to each other and they can also work together in other fields if they feel comfortable with the industry.
This is done as before, to meet the tastes of the people of the country cooperates with other countries to enter their products and operate in countries that want them.
Things like this also happen in Indonesia, many foreign companies operate in Indonesia. These companies range from the clothing, food, and electronics industries.
11. Product Excess
Every country has experienced a surplus of products within its own country. This triggers a decline in domestic prices. Because they don’t want their income to go down because the price goes down. So the country exports to other countries so that the country itself does not lower the selling price of its products. Thus prices will stabilize in the country.
Those are some of the positive impacts and factors driving international trade. With this international trade, our life feels easy, the goods we want are also easy to obtain. Countries will also cooperate a lot with other countries as a form of good relations between countries.
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Author: Ricky Atthariq