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Sunday, August 25, 2019

International trade has many potential benefits for participating Essay - 1

International trade has many potential benefits for participating countries, yet government regularly impose barriers to trade. By using real-life examples, dis - Essay Example Besides offering cost reduction advantages, there are also other benefits of the international trade including the opening up of the economy to evolve technologically. However, despite these perceived benefits, many governments do not allow the free access to the international trade and impose various trade related barriers to curb the international trade. There are various reasons and ways through which governments put bars on the international trade. This essay will look into the reasons behind why the governments do this and how they do this however before discussing this, I will be discussing about what international trade is and what benefits it provides to the countries that engage into the international trade with each other. International trade is a field of economics that applies microeconomic models to help understand the international economy. (Suranovic, 2004). The tools included for analysis in this field of economics include demand and supply analysis, consumer behavior, market structures as well as the impacts of market distortions. The basic assumption behind the international trade is comparative advantage. Comparative advantage exists when a country has superiority over another country in terms of producing goods or services. Comparative advantage is achieved when the opportunity cost of producing that good or service is low. Historical account of international trade would suggest that the theory of comparative advantage in the international trade was developed by David Ricardo more than two hundred years ago. This basic theory of David Ricardo however further modified and refined by Heckscher, Ohlin and Samuelsson. All these economists argued that all the countries different factor endowments of labor, land and capital inputs. Countries will specialize in and export those products which use intensively the factors of production which they are most endowed. Based on the comparative advantage of the international

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