Benefits and Costs of International Trade.

The advantages of International trade are:

> Wider market therefore higher turnover

> Choice has risen

> More trade

> Price competition

> Quality of the product

International trade brings with it all of these things. These can help an organisation immensely but at the same time it brings with it a lot more work and pressure. When a company like Tesco trade Internationally the market grows substantially because they are selling to a lot more people that they were before, this also means their turnover will rise with it. Choice in the market has risen because more products are available to buy so consumers are not restricted to certain products. More trade takes place because a larger market entices businesses to trade more. Price has been drastically affected because some overseas businesses can offer products cheaper than in Britain so British producers take action and lower prices also which then creates competition. Quality of products differ for example Belgian chocolate is seen to be the best tasting chocolate so thanks to International trade consumers can now buy chocolate straight from Belgium.

The disadvantages of International trade are:

> Disadvantaging developing countries

> Taste is different

> The environment can suffer thanks to International trade

> Workers are exploited

The above are all costs of International trade. Companies such as Tesco and Nike etc. have all these things to account for when they trade overseas. Disadvantaging developing countries is a complicated, harsh but true process. A Company like Tesco may decide to buy their wheat from Kenya, they pay the farmer £2000 for the wheat and sell the same wheat for triple that price in developed countries. Taste is different for different people around the world so companies must make sure that they study and can understand a countries culture and tastes. Environmental issues are very important because increased International trade means the world will become more busy and must transport more things across the world, by planes, cars, trains etc. so pollution will increase as well as many other things. Exploitation of workers is a highly common subject found in non developed countries things such as low wages, poor living conditions if any at all, lack of food etc.

Free trade is a term that describes the transaction between certain countries that have an agreement not to pay any tariffs or quotas. A good couple of examples include the European Union and NAFTA. Both these alliances have agreements with each other to let all the qualified countries trade without having to pay a price to the government of the country. The European Union consists of countries such as UK, France, Germany, Spain etc. and NAFTA consists of U.S.A, Canada and Mexico.

Comparative advantage is when a country specialises in making one product. The country will benefit from making the one commodity that they are good at rather than concentrating on making something they are average at. For example France is good at making wine so if they continue to make wine they can trade with a country like Brazil who is good at making coffee.

Protectionism is when a government decides to reduce the level of imports coming into their country. They do this for a number of reasons including:

> Infant industries- in this case a government will introduce a tariff or quota when a business is starting up so they can grow before foreign producers arrive.

> Unfair competition- e.g. when a company sells goods abroad at a lower cost to capture a market, foreign firms may receive subsides for making certain products.

> Balance of payments- reducing imports improves the balance of trade

> Strategic industries- to protect the manufacture of essential goods

> Declining industries- to protect declining industries from creating further structural unemployment.

The result of introducing protectionism is as follows:

> Prevents countries enjoying the full benefits of International specialisation and trade

> Invites retaliation from foreign governments

> Protects inefficient home industries from foreign competitors which means consumers pay more for inferior products.

All trade around the world is monitored by one governing body called the WTO (world trade organisation). It was set up in 1955 with the aim to help trade flow smoothly, freely, fairly and predictably. The WTO looks after trade agreements, acts as a forum for trade negotiations, settles trade disputes, reviews national trade policies and assists developing countries in trade policy issues.