Wondering Why?

Why is International Trade important?

freighter-315201_640The key role of trade in development

Development is the goal of every economy and trade holds the key that boosts absolute gain in the country’s advancement. Leading financial gurus advocated trade as an essential device in every county’s development.

Trade and poverty

There is a link between trade, development, and poverty. Poverty is significantly reduced when continuous development is sustained over longer periods while trade is strongly linked to development. Developed countries are invariably integrated with global economy; especially the export-kind of development that played important role in its successful trade strategy.

Trade in third world countries has not been developed due to:

1. Exploitation of natural resources – The country’s stock of natural resources that provides long term supply of goods or services is misused. For instance, trees in a forest are cut-down for commercial gain.

2. In countries where people have low level of education, economy is labor -intensive such as in manufacturing. Highly populated cities do not provide suitable land per person so only labor intensive jobs are available. In these areas, high educated workers receive high wages.

3. The main source of income for a bout 70% of the world’s poor who are living in the rural areas is agriculture due to low density of population and land areas suitable for families. Many are familiar with the strum and drang of U.S. agricultural export activity in recent years.

Trade can become a principle growth engine for countries:

Trade is universally the principal engine of growth; however, seizing new trading opportunities in the context of globalization is not fair game for countries that are not endowed with economic capacities. Countries must have –

1. Economic star players of the highest quality of expertise who have clear grasps of the progressive international stipulation.

2. An implication of the availability of minimal infrastructure and an appropriate range of human resources.

3. Adequate and efficient producer services to assist entrepreneurs minimize the expense for transaction that hinders economic efficiency.

Ten reasons why trade is important to development:

1. Trade enhances development as well as reduces poverty by fostering growth by way of generating better opportunities for commerce and investment. On the upside, it widens the productivity of the base via development of the private sector.

2. Trade motivates competition by assisting developing countries to economize the cost of inputs, to obtain monetary assistance through investments, to expand the value-added of their products and ascend the global value chain

3. Trade makes easy diversification of exports by giving developing countries an entry to newly- opened markets and recent materials that can start new production


4. Trade stimulates innovation by facilitating easy exchange of techniques, scientific know- how and contribution in research and development to include direct foreign investment.

5. Trade openness widens business opportunities for domestic companies as it starts up new markets, destroys needless barriers and facilitates business for exporters.

6. Trade enlarges options and reduces consumers’ prices by spreading sources of supplies for goods and services at the same time fortifying competition.

7. Trade is a major player in improving quality and standards of labor and environment through increasing competition and exchanging of best practices, forging partnership in trade, creating industrial capacity and product standard.

8. Trade minimizes cutting government spending by enlarging supply sources of goods and services at the same time strengthening competition for government


9. Trade makes stronger relations between nations by assembling people for exchanges of mutual benefits that contributes to peace and stability.

10. Trade generates opportunities for employment by encouraging the economic sectors to create stable jobs that result to higher incomes, therefore: improving livelihoods

Trade is the handmaiden of development as one cannot do more without the other.

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