Advantages of I B T

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Advantages of International

Trade
1. International Trade gives rise to improved
production and globalization through geographical
division of labor

2. International Trade helps to assemble the things


each nation needs
Division of labor

 It means breaking down production into small,


interconnected tasks, and then allocating these
tasks to different workers based on their
suitability to undertake the task efficiently.
 When applied internationally, a division of
labour means that countries produce just a
small range of goods or services, and may
contribute only a small part to finished
products sold in global markets.
Specialization
 Given that each worker, or each producer, is
given a specialist role, they are likely to
become efficient contributors to the overall
process of production, and to the finished
product. Hence, specialization can generate
further benefits in terms of efficiency and
productivity.
Specialization
 It can be applied to individuals, firms, machinery
and technology, and to whole countries.
 When countries specialize they are likely to
become more efficient over time. This is partly
because a country's producers will become larger
and exploit economies of scale. Faced by large
global markets, firms may be encouraged to
adopt mass production, and apply new
technology.
“Nations are almost always better
off when they buy and sell from
one another” – Brad McDonald
International Trade
 Countries trade with each other when, on their
own, because 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.
IMPORTATION
 Imports may be cheaper, or of better quality.
They may also be more easily available or
simply more appealing than locally produced
goods. In many instances, no local alternatives
exist, and importing is essential.
Comparative
 In one of the most important concepts in
economics trade was driven by comparative
rather than absolute costs (of producing a
good). One country may be more productive
than others in all goods, in the sense that it can
produce any good using fewer inputs (such as
capital and labor) than other countries require
to produce the same good.
Comparative
 Absolute compares how many plates one
produces the other country while comparative
compares how their opportunity cost differs.
Comparative
 Though a country may be twice as productive
as its trading partners in making clothing, if it
is three times as productive in making steel or
building airplanes, it will benefit from making
and exporting these products and importing
clothes. Its partner will gain by exporting
clothes—in which it has a comparative but not
absolute advantage—in exchange for these
other products.
 Reporter:

AYEN, Aivan T.
BSA3D

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