Positive And Negative Effects Of International Trade

As consumers, we often remain relatively unaware of the positive impact that international trade has on our lives. Many things that the United States imported are either things that we will not have enough to supply our demand like crude oil or things that will be more effective to import than produce it ourselves like textile products. If we forget the existence of the global supply of crude oil that will definitely increase oil prices and that will have huge negative effects in the U.S. economy that can be avoided by using international trade to import crude oil. The United States can manufacture textile products to reduce our dependency on imports, but doing it would be ineffective use of our scarce resources. Participating in international

Using this concept of comparative advantage makes clear that international trade, both exporting and importing, is beneficial to countries. The United States in specializing production in goods that they have a comparative advantage in producing allows the United States to meet local demand of their goods and have extra to export to other countries where there is demand for their goods, which could be sold at a higher a price than in the local market. Also, if the United States needs more of a certain product, then it could import it from another country that has a comparative advantage in producing that good. When the United States imports goods from countries, which has a comparative advantage in producing that good it will be cheaper than producing it domestically. Based on this examination, trade is obviously making everyone better

When the world price for a product is higher than the domestic price for the same product, then the nation should take part in international trade. In this situation the nation has a comparative advantage in the product and by increasing production and export the excess will result in greatly profits and efficiency of their resources. If the world price for a good is lower than the domestic price, consumer will be spending less their income as the product can be imported from another country for a cheaper price. The benefit of the producer of a good and the consumer of a good will be more than the costs in either scenario. Consumers will spend a greater portion of their income when there are exports of their desired good, but the increase in a producer’s profit more than compensates for any losses. This means that free trade will be beneficial even if they are an importer or an exporter of a good as the benefits will be greater than the