Sunday,17 april 2022In international economic studies, the understanding and benefits of trade between countries or internationally is the earliest and fundamental discussion. Trading activities are carried out to distribute goods and services from producers to consumers.
This activity does not only take place in one country. However, it is also carried out internationally (across countries) with the aim of meeting the demand for goods and services.
Advances in technology are increasingly encouraging foreign trade activities thanks to the various facilities offered. Especially with the existence of a free trade policy that further expands the range of export and import activities.
The definition of trade between countries that needs to be understood
Trade is the distribution of goods or services from producers to consumers. Thus, the definition of foreign trade is the distribution of goods and services from one country to another.
The background of the existence of international trading activities is that not all countries are able to meet all their needs independently.
Thus, inevitably have to bring in from other countries. So there is a transaction between two or more parties. The trade transaction must of course be in line with the procedures and regulations according to the agreement.
This will provide positive trade benefits between countries. The parties involved in this international activity include individual citizens of certain countries, community owners of companies, business entities or organizations, to government institutions.
While the form of activities such as the sale of goods and services, trade cooperation, to investment in establishing companies in other countries.
For example, you have a handicraft product and export it to European to American markets. Another example is Indonesia needs medical equipment to provide health services to the community. To fulfill this, the government brought in high-tech machines from other countries.
Benefits of international trade
1. Gaining Financial Advantage
As with trading principles in general, making a profit is the goal of buying and selling activities. If a country sells its products abroad, then they will get material benefits.
The international market with a very wide reach allows manufacturers to gain many customers on a global scale. Meanwhile, consumers also benefit from the large selection of products that suit their needs and desires.
2. Obtaining Unavailable Products
The next benefit of international trade is that people can get goods and services that are not available domestically. Every country certainly has various needs both for the benefit of the government and its people.
This is influenced by many things, such as different natural and geographical conditions, the availability of natural and human resources, technological advances, and so on. This is what causes the need to import goods from abroad.
3. Increase State Foreign
Exchange One of the commercial relations with foreign countries is realized through export activities or selling products abroad. These export activities certainly contribute to the country's foreign exchange. The higher the export volume, the greater the foreign exchange earnings.
4. Increase Job Opportunities
The next benefit of trade between countries is the creation of broad job opportunities. The global marketplace allows anyone to sell products anywhere without regional restrictions.
This leads to an increase in production. In line with the increase in production activities, the company needs more workers. This creates more job opportunities. Foreign trade also encourages the birth of new companies that can create job opportunities.
5. Technology Transfer
One of the significant benefits of trade between countries in the modern era is the transfer of technology. The regions of the world are divided into different countries with different technological advances.
Developed countries produce sophisticated technological tools that can be sent to developing countries. That way, production activities can take place effectively and efficiently.
This can encourage a growing industrial world. To encourage technological progress so as not to lag behind global developments, several countries import modern equipment that they do not produce. Thanks to the existence of sophisticated equipment, they will be assisted in carrying out various activities.
Factors driving trade between countries
There are several conditions and situations that underlie the occurrence of foreign trade relations. Some of them are as follows:
1. Reducing Production
Costs There are many things that affect the cost of production. Starting from human resources (HR), technological equipment, to science. Advanced high-tech equipment can be utilized to increase production.
However, to own it, it is not uncommon for companies to have to buy from abroad. With these technological equipment, companies can increase production results at an efficient cost.
2. Differences in Natural Resources
Each region has different geographical conditions, resulting in differences in natural resources. This is one of the driving factors for foreign trade.
An example of trade between countries due to differences in natural resources is Indonesia exporting energy abroad. This is because Indonesia has abundant natural energy resources which are not owned by all regions in the world.
3. Fulfillment of National Needs
Area A is a producer of fish and other marine products. Meanwhile, area B is the center of the clothing industry that produces various fashion products. People in area A need clothes, while people in B need seafood.
To meet the needs of each region, both of them trade with each other. The illustration is a simple illustration of the factors driving the occurrence of international buying and selling transactions.
Without these transactions, the needs of each region cannot be met. This situation occurs in various parts of the world which encourages them to conduct commercial relations in order to meet their national needs.
Thus is the understanding and benefits of trade between countries, this trade relationship is very important for the development between the countries concerned.
Lead image from unsplash
