Research Paper On World Affairs
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According to Business Dictionary, International trade is “the exchange of goods or services along international borders”. It means, when one country sells its products to other countries or buys products in other countries, this country trades internationally.
Nowadays almost all the countries all over the world are involved in international trade because it has a lot of benefits. Countries that trade internationally:
Have opportunity to get products or services unavailable within its borders;
Sale more products that domestic market needs;
Have opportunities to the specialization;
Participate in world economy – have the excess to Foreign International Investments.
Along with the benefits, international trade leads to the interdependence between countries. Different economic crisis are bright examples of such interdependent. If something wrong takes place in one country, other countries will feel the consequences for sure.
It is necessary to identify two main terms in international trade: export and import. According to Business dictionary, export is “a function of international trade whereby goods produced in one country are shipped to another country for future sale or trade”. Import is “a good or service brought into one country from another”. This two concepts form the background of international trade. While the main actions in ordinary trade are to sell and to buy, in international trade they transform into export and import respectively. Now I would like to give the information about leading exporters and importers in world merchandise trade in 2013 according to WTO statistics. (World Trade Organization –WTO- form rules and controls international trade)
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The next table shows the growth in the volume of world merchandise exports and production between 2005-2013 years.
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The main figure in this table is World GDP. The growth of 2% a year shows, that world economy produces more and more goods in order to satisfy the needs of the increasing world population. Otherwise, if this figure is negative, people all over the world could live in need of food, water and shelter.
Speaking about international trade it is necessary to point out the two main theories: free trade and protectionism (Blinder, 2009). Adam Smith was the first economist who believed that demand and supply will form the efficient trade. Defenders of this theory claim that no restrictions are needed to promote international trade because market forces are able to do it automatically. Second theory – protectionism – states that regulations in international trade are very important for its efficient functioning. There are many tools of international trade regulation. The most popular of them are:
Tariffs - special taxes imposed on import goods;
An import quota – a limitation to imported goods.
Also there can be used subsidies, voluntary Restraints, trade ban, imposing standards and others. All these methods are used by the government of a certain country in order to protect its producers and save job places. Otherwise, with the rules of free trade, if a country does not have enough possibilities to support some industry, because another country has more competitive
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advantages, this will lead to the lack of important industries within countries. For example, the refining industry is a fundamental industry for every economy. With the help of government protectionism, each country has its own refining industry in order not to be very dependent from countries Petroleum Exporting Countries and to have additional jobs.
Every country of course tries to make the most preferable conditions for its citizens. In order international trade to operate efficient supranational organizations were formed to control international trade. The main of them is of course World Trade Organization. Its rules, regulations and orders are obligatory for all member states. According to its own website, WTO main purposes are:
Without this organization there will be chaos in international trade and even its existence
will be in question.
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Business dictionary (2015, March 20). Retrieved from http://www.businessdictionary.com/definition/international-trade.html
Leading exporters and importers in world merchandise trade (2013). World Trade Organization. Retrieved from https://www.wto.org/english/res_e/statis_e/its2014_e/its14_world_trade_dev_e.htm
Blinder, S. ( 2009). Free trade. The concise encyclopedia of economics, 56-58.
Spruiell, S. (2006). Protectionism - Tariffs, Subsidies, And Trade Policy. Global Envision. Retrieved from http://www.globalenvision.org/library/15/1211
Bhagwati, J. N., Panagariya, A., Srinivasan, T.N. (1998). Lectures on international trade 2nd edition. Massachusetts Institute of Technology.