International Trade - Research Paper Example

To properly project the significance of international trade, this essay therefore has three goals: 1) to examine the aims and rationale of international trade through the examples of China and India, and lastly, 2) to compare the effects of international trade on developed and developing countries. Developed and developing countries, however, have different goals for engaging in international trade. The former, in the negative sense, aims to further their own advantage or, positively, to help the economic struggles of the latter.

For their part, developing countries aim to achieve the same level of development and prosperity as the developed ones. A change from status—developing to newly developed—may also change such trade goals. Generally though, trading is for survival or for the maintenance of countries’ economies. Countries exchange goods based on resources that are abundant in one and resources that are scarce in the other. This has also been called by David Ricardo as “comparative advantage” and is one of the rationales for the existence of trade.

Nation-states export goods that are produced in large quantities within the national economy, while they import goods that are either scarce or produced in small quantities in domestic markets (Husted & Melvin, 2000, pp.60-61). Regardless of the nation’s capacity, “profitability of production” is still achievable so long as there is a "comparative advantage." Although absolute advantages in the goods they produce may be absent, all economies that are operated by competitive markets have comparative advantages.

Ricardo further proposes that “no country can long import, unless it also exports, or can long export unless it also imports" (as cited in Blatt, 2004). He confirms that there are benefits to be had in the import-export of goods between and among trading nations. Hence, engaging in both is “equally essential” so as to