Technology

How a Country Benefits From International Trade

International trade, otherwise known as free trade removes the barriers that limit the country’s surplus. This has a great benefit on both the producers and the consumers. It has been seen to be the catalyst of the growth of many economies. Formulated by David, Ricardo, the law of comparative advantage was a pivotal development of the theory of absolute advantage previously developed by Adam Smith. As opposed to the theory of the absolute advantage, Ricardo believes that comparative advantage is enough to make trade possible and desirable.
Today international trade is done without much hindrance. There is the removal of tariffs and import quota which we identify as protectionism. The removal of tariffs and quota can practically increase the consumer surplus as they allow domestic consumers to enjoy foreign products at lower costs. The reduction in the producer surplus brought by the entrance of foreign producers through importation can be outweighed by the gains of the domestic consumers, thus increasing the total surplus. Aside from the enjoying lower prices, consumers also benefits from the variety of products available to them through trade. Importation also provides greater choices for the consumers. Some of the practical benefits from international trade are the following: “enhances the domestic competitiveness, takes advantage of international trade technology , increase sales and profits, extend sales potential of the existing products, maintain cost competitiveness in your domestic market, enhance potential for expansion of your business, gains a global market share, reduce dependence on existing markets and stabilize seasonal market fluctuations”

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