Modern International Trade

Although International trade has always been important, from the 16th century it began to acquire greater relevance with the creation of the European Colonial Empires. Thus, trade became an instrument of imperialist policy.

Aaron Afilalo is a Professor of Law at the Rutgers-Camden School of Law. His scholarship primarily focuses on international trade, international business transactions and E.U. Law. In this post, Professor Afilalo speaks about the benefits that international trade has to offer.

International Trade began to show its current characteristics with the appearance of National States during the seventeenth and eighteenth centuries, the leaders discovered that by promoting foreign trade they could increase the wealth and, therefore, the power of their country.

How does international trade benefit us?

In this article, Aaron Afilalo will tell you the key benefits of international trade.

For a long time, international trade exchanges have been considered a fundamental piece in world economic growth. The emergence of international trade is generated as a response to the inability of a nation to produce everything that its economy requires to achieve development.

It is clear that not all nations have enough goods, even having them, not in all cases they are high quality goods. Therefore, the development of countries translates into multiple benefits, not only for the economy as such, but also for their own growth.

Take for example the energy of our homes or industry. Although oil is a powerful source of energy, few countries actually have the capacity to produce a sufficient volume to be self-sufficient.

Oil is essential in many aspects of our life, including transportation, heating, dyes, detergents, pharmaceuticals, etc. However, what happens if a country does not have enough oil to meet these demands? The only feasible solution is to obtain oil through international trade with other nations.

On the other hand, and if we look at it from a macroeconomic scope, international trade leads to productive specialization among nations. In other words, the international division of labor.

This happens because there is inequality in the productive factors and also in the technological composition of the goods. As a result, a nation will be forced to import goods that it cannot produce or produces at a disadvantage compared to other countries.

At the same time, that same nation will try to export those products in which it can obtain advantages. From the microeconomic level, international trade benefits both those who import and those who export.

Importing countries have a great diversity of products to satisfy consumer demand, in terms of variety, better quality and better price. In the case of exporting countries, the benefits include the expansion of markets, an increase in production, a better absorption of fixed costs, as well as a reduction in the fall of domestic sales.

In any case, international trade enables a nation to have a greater number of products compared to what it could generate if it had no foreign trade. Consequently, the more favorable the conditions of commercial exchange for a country, the greater the benefit that international trade will generate compared to the benefit of other countries.