International Business: Imports and Exports - Research Paper Example

International business- Imports and Exports Introduction International business can be blamed for the big gap between the developed and developing nations. International trade refers to trade between two countries who have agreed to burn trade regulations with regards to the products traded. Ratification of trade tariffs between many countries in the globe has increased competition in the local markets. International trade results to increased employment and a developed economy in the globe. Comparison of economies before the spread of international trade shows a significant difference in the economic growth rates. Geographic positioning of the countries in the globe causes production of agricultural products and mineral related product to vary depending on the country. Countries located in the equatorial highlands in America and Africa highly depend on agriculture while countries located in the Arabian deserts produce oil products. The difference in production between the countries results in the need for trade (Morrissey 699). The common character that signifies third world nations comprise of agriculture dependent nations. The developed nations deal with service industry and trade in machines. The trade between developed and undeveloped nation enables the developed nations to obtain crucial machines and services that they do not produce. The developed nations purchase agricultural products in their raw form which are later processed and resold in the country or to other countries. There is a significant difference in the commodities traded in the international market. Raw agricultural produce fetches the country less income compared to finished goods and services sold by the developed nations. The big gap between the commodities traded is reflected in the balance of trade. Developing nations tend to have a negative balance of trade also called trade deficits while developed nation has positive of trade also called trade surplus (Carneiro 989). Background information Balance of trade refers to the difference between the value of imports and exports with regards to a country. A trade surplus refers to a positive balance of trade while a trade deficit refers to negative balances of trade. While undertaking international trade, traders can conduct trade through different channels. B2B refers to the sale of commodities between two business entities. This channel of distribution attracts low profit but is convenient for the seller. B2C channel of distribution involves businesses having outlets in the countries they conduct trade. This channel of distribution attracts high profit but requires the involvement of the business man compared to B2B. Most developed nation prefers the B2C to B2B channel of distribution which explains the surplus in trade (van de Klundert 208). Free trade refers to an agreement between two countries to ensure that trade regulations are abolished with regards to the legal products traded. Free trade has been adopted by some countries where the developed nations have set up export processing zones to attract investors. The country benefits from employment of citizens in the export processing areas as tax restrictions are reduced in the export processing zones. Terms of trade refer to another international trade term which refers to the rate of exchange of an import for an export. Exchange rare refers to the valuation of currency depending on the economic growth of a country. International trade affects the budget of the country and has to be monitored to avoid economic slumps (Baffes 427). The gap between the developed nations and the developing nations needs to be bridged to ensure stability in the global economy. Some economists blame the immense gap to the free trade between the two dissimilar economies. The difference in trade has caused the developing nations to lose out in the trade as their commodities retail for lower prices and the export cost more. The result has been unbalanced trade between the nations with developing nations having trade deficits and developed nation having trade surplus. Some economists have proposed the elimination of free trade to ensure that the developing nation can value their commodities at higher prices compared to free trade. Proposals have also been aired with developed nations encouraged to become more aggressive with regards to international trade and use the B2C channel of distribution to reduce the deficit in trade (van de Klundert 210). Abstract The difference in economic growth between nations involved in international trade will always affect the balance of trade. The abolishing of free trade would create an unpleasant business atmosphere and may not be the solution to this problem. Developing nations need to start producing quality finished goods that will compete in the international market rather than selling raw materials to the foreign market. This move will require the nations to invest heavily in machines to process the raw material to finished goods. The nation also needs to select markets for its produce that encourage a favorable terms of trade. Exchange between developing nations should be prioritized. The governments of developing nations should also encourage B2C channels of distribution to encourage higher returns for locally produced goods. International trade is to blame for the gap in economic development. Evaluations of sides of the issue To harmonize economic development in the globe, the producers need to venture into the foreign market and sell their goods directly to the consumers rather than depend on middlemen. Middle men have to be compensated for their efforts and end up benefiting from the transaction compared to the producers who put their effort into the production process. When selling goods using the B2B channel, the buyer takes the role of the middleman and gets paid for this role. The producers have to exploit this opportunity to increase their earnings. Increases earnings by the producer benefit the developing nations as the tax charged increases. Employment also arises when business men venture into this mode of product distribution. Uganda, a third world country located in eastern Africa represents a country that has used this strategy to increase the income generated from coffee. The country facilitates its producers to trade their products in the international market rather than using middlemen. The country's economy has improved since the fall of the last dictator in the country. The country serves as evidence that with the right approach to international trade. The income generated can improve the economy. Selling the products directly to the consumers can also be related to the bananas produced in the country. The bananas are sold directly to consumers or through farmer associations to international markets. This method of selling their products has increased the revenue generated from the product. Other nations with poorer economies should be encouraged to follow Uganda’s example to bridge the gap between developing and developed economies (Carneiro 992). Developing nations have to be selective with regards to free trade agreements signed. Free trade increases the pressure on the local industries to produce quality products competitive in the local and international market. Free trade also increases employment opportunities for the local community. The citizens have a wider variety to choose with regards to international trade. Local industries can benefit from by increasing the market for their goods. Free trade can be an asset and a liability to the country. When selecting a country to conduct trade with, the government of a developing nation should be careful to ensure that the benefits of international trade out weigh the demerits (Walmsley 323). Developing nations in Africa in the recent times have started partnering with Asian nations like china and India to improve their economies. China produces cheaper equipment compared to other developed nations in turn the African countries offer raw material for their industries. This partnership has seen economies in Africa improve through the use of cheap technology. Information technology provided by the Asian countries has enabled countries in Africa to improve the quality of products sold in the foreign market. The technological advances facilitated by the trade agreements shows how developing nation can benefit from trade agreements with developed countries (Yin 47). Technological advances in the current economy work towards increasing the products and services offered in the market. It is a common trend for countries in a developing nation to trade in raw material. Raw materials effect on the balance of trade results to trade deficits compared to the finished goods and high quality commodities. Developed nation concentrate their international trade to quality finished goods which improves their terms of trade. The terms of trade are significant in determining the country’s economic position with regards to other countries. For developing nation to improve their economic growth, there arises the need to produce finished goods. Selling finished or refined products ready for the consumer would create employment in the country and the products would improve the nation’s terms of trade (Morrissey 701). India, Libya, Egypt, South Africa is among the developing nations whose economy has improved tremendously over time due to production of quality finished goods. India car production of the Mahindra jeep has provided employment for the locals and increased the countries exports. Libya and Egypt are desert countries in Africa have utilized available resources to produce quality finished products. The products have enabled the countries to improve their terms of trade. From the infrastructure to the resources available in South Africa, the nation has shown significant economic growth to become among the most developed nations in Africa. These nations need to be followed by the developing nation to improve the economy of the globe (Bolwig 431). Refutation of your favorite solution Discriminatory policies against other developed countries may affect international trade. Poor relationship may result from choosing countries to trade, and those not to trade. Overall trade in the international markets should not prohibited by the government. The government should facilitate international trade with other countries but encourage free trade with countries where the local country would have better terms of trade. The quality of the products traded in the international market should not be compromised to ensure that citizens have a choice of products. Developing nations can partner with countries that sell commodities cheaply and will buy the commodities sold to them at competitive prices. B2C channel of distribution ensures that the commodities are sold to the consumers directly. The method may cause inconvenience to the producer as concentration on production can be affected by searching for markets. The method may be difficult to implement for perishable products thus the need for networking. The producer may sell his products directly to large institutions like hotels and schools. Constant communication between the producer and customer can ensure that the farmer has a ready market for the product by harvest time. Information technology has allowed farmers to collaborate and sell their products in foreign markets at competitive prices (Walmsley 328). The difference in economic development in globe causes the divide between the developed and developing countries. Developed countries have better terms of trade compared to the developing countries. The balance of trade also differs with developing nations showing a deficit in trade while the developed nations show a surplus. In bridging the gap between the economies of the developed and developing countries, quality products need to be produced by the developing nations to enable them to compete adequately in the international market. The developing nations need to establish the right countries to establish free trade with to ensure that the trade is beneficial to both countries. The developing nations should also focus in production of finished goods rather than sale of raw material that have low income. Implementation of this solution would result into a developed global economy. Works cited Baffes, John. "Restructuring Uganda's Coffee Industry: Why Going Back To Basics Matters." Development Policy Review 24.4 (2006): 413-436. Bolwig, Simon, and You Liangzhi. "Quality Or Volume? An Economic Evaluation Of Coffee Development Strategies For Uganda." Development In Practice 17.3 (2007): 433-438. Carneiro, Francisco Galrao, and Jorge Saba Arbache. "Assessing The Impacts Of Trade On Poverty And Inequality." Applied Economics Letters 10.15 (2003): 989-994. Morrissey, Oliver. "International Trade And Developing Countries: Bargaining Coalitions In The GATT And WTO, By Amrita Narlikar (London: Routledge, RIPE Studies In Global Political Economy, 2003, Pp. 238 + Xviii) Behind The Scenes At The WTO: The Real World Of.." Journal Of International Development 17.5 (2005): 697-702. van de Klundert, Th. "The Evolving International Economy." 48.2 (1988): 208-210. Walmsley, Terrie L., Thomas W. Hertel, and Elena Ianchovichina. "Assessing The Impact Of China's WTO Accession On Investment." Pacific Economic Review 11.3 (2006): 315-339 Yin, Jason Z., and Sofia Vaschetto. "China's Business Engagement In Africa." Chinese Economy 44.2 (2011): 43-57. Read More