”Trade is power, but International Trade is Superpower” Jean Narcisse Djaha
Key Highlights
- Trade and international trade are great tools to maintain global economic leadership.
- International trade means strong economic power.
Introduction
Global trade is a driving force necessary for economic growth and sustainable development. If there is a point on which most international development and economic experts agree, it is that trade among nations constitutes a force for economic and sustainable development. This article attempts to capture the importance of trade in global economic leadership.
One of the basic sectors of the national economy is trade. Its task is to shift products manufactured by industry, agriculture, and other production departments with the help of commodity exchange, realized through commodity turnover, i.e., purchase and sale. The profit is generated as a result of a higher selling price than the purchase price.
International trade defined.
As the name indicates, global trade encompasses trade between countries across the world, be it regional or global. Trade envelopes import-export of services and products. Many international experts and scholars would agree that trade represents one of the significant pillars of the global economy. Because no country can live alone, the need to trade emerges naturally, and their economic development is based on trade developments with other countries. When nations trade with other countries, they have the potential to acquire supplies and goods for their industries.
Why do nations trade globally?
As the name indicates, global trade encompasses trade between countries across the world, be it regional or global. Trade envelopes import-export of services and products. Many international experts and scholars would agree that trade represents one of the significant pillars of the global economy. Because no country can live alone, the need to trade emerges naturally, and their economic development is based on trade developments with other countries. When nations trade with other countries, they have the potential to acquire supplies and goods for their industries.
Global trade directly affects the national balance sheet. International trade is crucial for international integration, economic development, and leadership. When countries trade with one another, they automatically transport part of their influence (economic, social, cultural, etc.) outside their home. Trade contributes to global efficiency. When a country opens to trade, capital and labor shift toward industries in which they are used more efficiently. Societies derive a higher level of economic welfare.
International trade is vital for the integration of nations into the global economy. Countries trade with each other when, on their own, they do not have the resources, or capacity to satisfy their own needs and wants. By developing and exploiting their domestic scarce resources, countries can produce a surplus, and trade this for the resources they need.
Economic Benefits of International Trade for Companies
Import-export companies are at the center of trade. International trade is therefore a profitable sector for many companies. In addition to those that focus on import and export, industrial companies also benefit from these multiple exchanges:
- reduce the cost of production: as mentioned above, imports make it possible to obtain cheaper raw materials. Some even opt for semi-processed or even ready-to-pack products to reduce the investment in industrial equipment.
- diversify the merchandise: as a distribution company, you can expand your product offering, with the possibility of selecting the quality you want to offer to customers.
- have a higher profit margin: in fact, many companies in the production areas focus on exporting to sell their products at a higher price. This is particularly the case for spices and aromatic plants which account for only part of the local market. Not only do companies increase their margin, but they also reach a wider target.
For consumers, the development of international trade is an opportunity to buy goods that are not produced locally. It also offers more choices, whether in clothing, household appliances, electronics, and even automobiles. Moreover, importing makes it possible to offer different price levels. Some products are therefore offered up to 40% cheaper than local ones, which gives access to households with low purchasing power. For its part, export increases the purchasing power of the population.
Furthermore, import-export relations contribute to a country’s trade balance. This means that these exchanges create jobs and contribute to economic growth. However, the risk of social dumping cannot be excluded. This is a reduction in employment in the face of competition from countries with low labor costs.
Global Trade & Economic Development
“When countries open up to trade, they generally benefit because they can sell more, then they can buy more. And trade has a two-way gain.”– Jeffrey Sachs, Special Advisor to the UN Secretary-General and former Director of the UN Millennium Project.
In Africa, Mauritius — one of the most open economies in sub-Saharan Africa — exemplifies how trade can be a strong instrument for achieving the MDGs. Its traditional exports, such as sugar and textiles, have been sustained by trade policies that have allowed the country to adapt to international competition and develop value-added services. Mauritius’ GDP growth reached an impressive average of 6 percent per year after implementing an export-oriented strategy in 1996. Other successful initiatives have been initiated in Rwanda, where coffee exports have fueled economic development, and also in Kenya, where cut-flower exports have seen a growth rate of 35 percent annually over the last 15 years, sustained by trade incentives.
International trade gives consumers and countries the opportunity to be exposed to new markets and products. Almost every kind of product can be found on the international market: food, clothes, spare parts, oil, jewelry, wine, stocks, currencies, and water. Services are also traded: tourism, banking, consulting, and transportation. A product that is sold to the global market is an export, and a product that is bought from the global market is an import. Imports and exports are accounted for in a country’s current account in the balance of payments.
Final Thoughts
Global trade creates a tremendous return on investment that helps generate millions of good and quality jobs for citizens. Trade and international trade are great tools to maintain global economic leadership.
Author The Author
Jean Narcisse Djaha, Ph.D., is the Founding President and Chairman of the African Council on Foreign Relations. He is guided by Romans 8:30” And those he predestined, he also called; those he called, he also justified; those he justified, he also glorified”.
