International trade refers to business that takes place between various countries on the international arena. The international trading system was established to ensure that all the countries that participate in international trade benefit evenly from the trade. International trade entails importing and exporting of goods to and from other nations. The trade allows participants to obtain goods that are not available in their countries from those that have them in surplus. Appleby (2010) points out that, things have changed with regard to international trade, unlike before the introduction of international trading system when countries that had stable economies dominated the market. Today discrimination and domination is history and thus the world’s international trading system is fair and treats all nations equally.
The initial cost of getting started in international trade is expensive hence in the past decades it has been very difficult for individuals to engage in international trade because the tariffs were very high thus people had to combine efforts to be able to penetrate the global market. Of late globalization has made international trade to be easier because it uses the internet as its platform. Business transactions take place swiftly and affectively because the trading partners can communicate effectively, thanks to the latest technological developments (Caves, 2007).
International trade was initially controlled by trade agreements called treaties, which were perceived to be discriminatory because they safeguarded the interests of the developed nations at the expense of developing nations. When the international trade system came into being it pushed for the reduction of tariffs because the tariffs that was being imposed on commodities was very high and thus the developing nations could not cope with such high tariffs, hence some were exiting the market.
The world trade organization (WTO) is the major overseer of international trade. It is said that the high tariffs were meant to protect internal industries from being eliminated from the market. Now that the international trade is free there have been numerous efforts to scrap off the tariffs (Appleby, 2010).
International trade promotes peace in the world. According to Pugel (2007), this is because when countries participate in trade they would not want to damage their trade ties. For instance, when country x imports goods from country z and exports commodities from country x, the two countries depend on each other hence peace is crucial to their relationship. When countries trade with each other each country tries to cultivate a good relationship with the other members of international trade.
This is because if a country is in conflict with other countries, its economy is most likely to crush because there would be no market for its exports and also it would be difficult for it to buy goods from other countries. A good example of how conflict can affect a nation is the recent economic sanctions on Iran which has led to many other conflicts in Iran such as air pollution because no country is allowed to trade with Iran.
International trade system helps in reducing the price of processed commodities. This is because the expenses of importing the necessary raw materials have been slashed and this reduction is extended to the consumers. Before the introduction of international trading system the price of commodities especially imported goods was very high. The reason for this swelling of commodity prices was that the traders had paid a lot of money to the authorities in order to be allowed to bring their goods or raw materials. This was interpreted as loss and the profits had to be gained by hiking the commodity prices.
International trade gives consumers more variety. There are so many varieties for one option hence the customer settles on the one that is satisfactory. This would not have been possible if customers were limited to commodities that are available in their nation. This means that customers have a wider market to choose from. Before the establishment of international trade, people had to stick to the locally available commodities even when they were of poor quality (Caves, 2007). For instance, consider a country where industrialists can only manufacture bicycles but cannot manufacture automobiles. The people of such a country benefit from international trade because it allows them to purchase what they don’t have in their country from nations that trade in those items. Transport would be difficult in such a nation if people were barred from purchasing commodities from beyond boarders.
International trade system boosts the economy of countries that participate in international trade because the buying party has to convert its currency to that of the selling party. The benefit here is possible if the currency value of the buying party is higher than that of the seller, thus when the seller converts the money received from the purchasing party its more which contributes to profit margins.
Hinkleman (2005) argues that international trading system promotes discipline in government. This is because countries that manufacture or trade in commodities of poor quality risk from being eliminated from international trade. Countries that are in war and related conflicts are not allowed to participate in international trade. For instance there are some countries that are not allowed to take part in international trade such as Zimbabwe because it is perceived the proceeds made by such countries are used to pay for the upkeep of military commanders.
In essence, the international trading system allows everyone to participate with minimal risks. This means that traders cannot do as they wish because they are being monitored by an oversight board. International trading system has enhanced the development of multinational enterprises, thus boosting the gross domestic product (GDP). Therefore, governmental and non-governmental institutions should embrace the goals set by international trading system with the aim of business diversification and equality.
Appleby, J., 2010. The Relentless Revolution: A History of capitalism. New York: W.W Norton & Company.
Caves, R.E., 2007. Multinational Enterprise and Economic Analysis. London: Cambridge University Press.
Hinkleman, G.E., 2005. Dictionary of international trade: handbook of the global trade community. California: World Trade Press.
Pugel, T., 2007. International Economics. 13th Ed. New York: McGraw-Hill Irwin.