• Why do countries trade?

• Trade is a basic economic concept involving the buying and selling of goods and services, with compensation paid by a buyer to a seller, or the
exchange of goods or services between parties. Trade can take place within an economy between producers and consumers. International trade
 allows countries to expand markets for both goods and services that otherwise may not have been available to it. It is the reason why an American
consumer can pick between a Japanese, German, or American car. As a result of international trade, the market contains greater competition and
therefore, more competitive prices, which brings a cheaper product home to the consumer.

International trade is the exchange of goods and services between countries. Trading globally gives consumers and countries the opportunity to be
exposed to goods and services not available in their own countries, or which would be more expensive domestically.
 The five that reasons international trade takes place are
i. differences in technology,
ii. differences in resource endowments,
iii. differences in demand,
iv. the presence of economies of scale,
v. and the presence of government policies.

Nations trade because they gain by doing so. The principle of comparative advantage states that each country should specialize in the goods it can
produce most readily and cheaply and trade them for those that other countries can produce most readily and cheaply. The result is more goods at
lower prices than if each country produced by itself everything it needed. Free trade allows trade among nations without government restrictions.
o There are two fundamental issues connected with the international trade—why nations trade with one another and why there is a need for a
separate theory of international trade.
The basic reason for different nations entering into trade is that no nation has the capacity to produce by itself all the commodities and services that
are required by its people. There has been an unequal distribution of productive resources by the nature on the surface of the earth. Countries differ
in respect of climatic conditions, availability of cultivable land, forests, mines, mineral products, labour, capital, technological capabilities and
managerial and entrepreneurial skills.
Given these diversities, no country has the potential to produce all the commodities in the most efficient manner or at the least cost. For instance,
India can produce textiles at the lower cost while Japan can produce electronic goods and automobiles cheaply. Just as there is division of labour in
the case of individuals, the countries also adopt this principle at the international level.
One simple way to see rising importace of international economics is to look at the growth of trade .All nation participate in
international trade.
• Trade is growing in importance because of the rapid integration of the world economy.businesses,consumers and
government increasingly realized that their lives are affected by not only what goes not only what goes on their own
town,state and country but also what is happeningaround the world. Carrying out trade at an international level is a
complex process when compared to domestic trade. When trade takes place between two or more nations factors like
currency, government policies, economy, judicial system, laws, and markets influence trade. To smoothen and justify the
process of trade between co-International trade is the exchange of goods and services between countries.
 Most importantly countries willing to maintain economic integration through ”International Trade”.
• International trade is-
A. The exchange of goods and services between countries.
B. Trading globally gives consumers and countries the opportunity to be exposed to goods and services not available in
their own countries, or which would be more expensive domestically.
C. The importance of international trade was recognized early on by political economists like Adam Smith and David
Ricardo.
Still, some argue that international trade actually can be bad for smaller nations, putting them at a greater disadvantage on
the world stage.
Trading globally gives consumers and countries the opportunity to be exposed to goods and services not available in their own countries, or which
would be more expensive domesticalStill, some argue that international trade actually can be bad for smaller nations, putting them at a greater
disadvantage on the world stage.
• Benefits of Globalization or global trade:
A closer look reveals that globalization has been the engine that creates jobs and wealth. Benefits of global trade include the following:
Productivity grows more quickly when countries produce goods and services in which they have a comparative advantage. Living standards can
increase faster. One problem is that big G20 countries have added more than 1,200 restrictive export and import measures since 2008.
Global competition and cheap imports keep prices down, so inflation is less likely to stop economic growth. However, in some cases this is not
working because countries manipulate their currency to get a price advantage.
An open economy spurs innovation with fresh ideas from abroad.
Through infusion of foreign capital and technology, global trade provides poor countries with the chance to develop economically by spreading
prosperity.
More information is shared between two trading partners that may not have much in common initially, including insight into local cultures and
customs, which may help the two nations expand their collective knowledge and learn ways to compete globally.
• countries of different economic standing, some international economic organisations were formed, such as the World Trade Organization. These
organisations work towards the facilitation and growth of international trade. Statistical services of intergovernmental and supranational
organisations and national statistical agencies publish officialstatistics on international trade.

 There are mainly three facts that’s why country trade:

1.The distribution of natural,human and capital resources among nation is uneven.Nation differ in their endowmwnts of economic resources.

2.Efficient production of various goods requires different technologies or combinations of resources.

3.Products are differentiated as to quality and other non-price attributes.Some people may prefer certain imported goods to similar goods made
domestically.
• Countries are benifitted by trading internationally because of there are lots of advantages of international trade that
any country needs to improve their structure of economic position world wide, some of these are:-
1. Increased revenues. .
2. Decreased competition.
3. Longer product lifespan.
4. Easier cash-flow management.
5. Better risk management.
6. Benefiting from currency exchange.
7. Access to export financing.
8. Disposal of surplus goods , and so on…
One might argue that the best way to protect workers and the domestic economy is to stop trade with other nations.
Then the whole circular flow of inputs and outputs would stay within our borders. But if we decided to do that, how
would we get resources like cobalt and coffee beans? The United States simply can’t produce some things, and it can’t
manufacture some products, such as steel and most clothing, at the low costs we’re used to. The fact is that nations—
like people—are good at producing different things: you may be better at balancing a ledger than repairing a car. In
that case you benefit by “exporting” your bookkeeping services and “importing” the car repairs you need from a good
mechanic. Economists refer to specialization like this as advantage.
In conclution through trade, imports and export of goods and services creates economic globalization and integration,
that typically includes reduction of elimination of trade barriers and the coordination of monetary and fiscal policies.
Economic integration aims to reduce costs for both consumers and producers and increase trade between the
countries involved in the agreement.