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Do countries really benefit from international trade - Essay Example

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The purpose of this paper is to answer the fundamental question of ‘Do countries benefit from international trade.’ The format of this paper will first highlight the potential advantages of international trade followed by a discussion of the potential disadvantage. Finally…
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Do countries really benefit from international trade
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Download file to see previous pages One example of this would be Jamaica and Great Britain. Whilst it is very easy for Jamaica to produce pineapples, it is very difficult for Great Britain to do so. By exchanging goods that are in demand in Jamaica, Britain could receive something they might not otherwise have. Building on this argument is the idea that certain products could be traded that meet different specifications. One example of this would be steel. Whilst Europe and the United States both produce steel it may be that they are able to independently produce steel to different specifications, as such the countries are able to focus their operations to producing the product in which they specialize. What this translates to is better resource allocation, which ultimately encourages countries to produce products in which they have a comparative advantage. By extension it could be said that nations are less wasteful with their resources, for example Great Britain could grow tropical fruit in giant, heated greenhouses but that would represent an inefficient allocation of resources.
A second advantage to international trade is that nations may capitalize on proximity advantages. What this means is that even though a country may be able to produce a good domestically there may be a foreign producer that can more efficiently supply a product by nature of them being able to save on logistics costs. An example of this would be Canada and the United States wherein Western Canada is a major producer of timer however if Eastern Canada needs timber they may turn to American suppliers that are only a few hundred kilometers away rather than on the opposite side of their own domestic country.
The third advantage of international trade is the associated increased competition that comes with said trade. When a domestically produced product faces no real international competition it is often argued that stagnation occurs, insofar as there is no real need to innovate because consumers have no other option ...Download file to see next pagesRead More
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