International Trade And Operations

 Introduction

                          International trade allows countries to expand their markets and access goods and services that otherwise may not have been available domestically. As a result of international trade, the market is more competitive. This ultimately results in more competitive pricing and brings a cheaper product home to the consumer. 

                  International trade is the exchange of goods and services between countries. International trade was key to the rise of the global economy. In the global economy, supply and demand and thus prices both impact and are impacted by global events. 

Imports And Exports

                             A product that is sold to the global market is called an Export, and a product that is bought from the global market is an Import. Imports and Exports are accomted for in the current account section in a country's balance of payments. 

             Global trade allows wealthy countries to use their resources, e.g. labor, technology, capital more efficiently. Different countries are endowed with different assets and natural resources: land, labor, capital and technology, etc. This allows some countries to produce the some goods more efficiently, that means more quickly and at low cost.

 

Exports

                  Exports are the goods and services a country produces domestically and sells to businesses and customers who resides in a foreign country. This results in an influx of funds to the country that is selling their goods and services. Companies choose the exports of their products and services, because of participate in global trade. Access new markets, Increase revenue.  Companies exports goods or services in areas where they have a competitive advantage over other companies because their products or services is superior. 

Imports

                    Imports are the goods and services a business or customers purchases from another country. This results in an outflow of funds from the country that is purchasing foreign goods and services. Most countries try to exports more goods and services than they import to increase their domestic revenue; a high level of imports can indicate a growing economy. 

Importance Of Exports And Imports

                   Exports & Imports are important because together they make up a country's balance of trade; which can impact an economy's overall health. In a healthy economy, both imports and exports see continual growth. This usually represents a sustainable and strong economy. When exports and imports become unbalanced, it can cause either a trade surplus or a trade deficit. To fully understand the role exports and imports play in economy, it can be helpful to learn how they influence a county's Gross Domestic Product (GDP), Exchange Rate, Level Of Inflation And Interest Rates.  

Gross Domestic Products

                     A country's gross domestic product (GDP), also referred to as its national income, is the gross market value of the total goods and services it produces during a set time period. GDP is one of the most common metrics used to track the overall health of a nation's economy because it can help determine if an economy is growing or experiencing a recession. To calculate the GDP, first determine the net exports by subtracting the total imports from the total exports. 

Exchange Rates

                  An exchange rate is the current value of a country's currency compared to the value of another country's currency. A nation's exchange rate and its exports and imports are closely related. If a country has a weak domestic currency that is worth less than the currency in foreign countries, it can stimulate exports and make imports more expensive. If a country has a strong domestic currency that is worth more than the currency in other countries, then the opposite in true: the country may see a decrease in exports and increase in imports. 

Inflation Levels And Interest Rates

               Inflation measures the rate of increase in the general price of selected goods and services over a set period of time. A high inflation level typically results in higher interest rates. This can results in an increase in imports and decrease in exports because it becomes more cost effective to purchase goods from foreign countries than to purchase goods domestically. 

Elements Of International Trade

1) Transaction Cost

                      Transaction Costs play a vital role in international trade and internationalization of production with fragmented supply chains. The cost related to the money exchange behind trade. It can include the gathering of information, negotiating it, letters of credit and transportations, it includes the rate of exchange if one currency is exchanged with other currency. 

2) Tariff And Non - Tariff Costs

               With tariffs, the government receives the revenue whereas no revenue is received by the government by applying non - tariff measures. However, it is used by the industry an appropriate measures to meet the demand of the country and to protect the country. 

3) Transport Costs

                   Transport Costs are one of the major components of trade costs along with tariffs, non-tariff measures and distribution costs.  The full costs of shipping goods from the point of production to the point of consumption. There are various factors which are used to reduce this cost. Transport Cots much in the same way as tariffs, penalize goods produced in multiple stages across different countries, since producers need to pay for moving goods at each stage of the production process. A decline in transport costs will therefore be particularly beneficial for trade in vertically specialized goods. Transport costs depends on many factors such as  modes of transportation, infrastructure and geographical location. Transportation cost for developing countries are much higher.    

4) Time Costs

                       It is the time duration between the order placed and the order received. Long distance international trade generally have time delays due to the custom inspection. 

Advantages Of International Trade

a) Countries can exclusively focus on producing goods and services which are specific to their geography, skills and capacity. This beads a culture of differentiation and specialization. 

b) International trade enables a country to get high - quality goods and services at exceptionally affordable prices so that the specific needs and requirements of its people can be met.

c)  For facilitating international trade, a number of countries have began to enter into unique trade agreements. These agreements emphasizes the transfer of technology from the more developed to the less developed nations, thereby enabling the latter to improve their production abilities. 

d) The international trade opens a lot of doors in terms of creating jobs and providing employment. 

                            

Conclusion

                        International Trade allows countries to expand their markets and access goods and services that otherwise may not have been available domestically. As a result of international trade, the market is more competitive. This ultimately results in more competitive pricing and brings a cheaper product home to the consumer. The elements of International Trades are Transaction Cost, Tariff And Non Tariff Costs, Transport Cost OR Logistics Costs, Time Costs. 

                           International trade may give consumers and countries the opportunity to be exposed to new markets and products. Almost every kind of product can be found in the international market; such as foods, clothes, spare parts, oil, jewelry, stocks and currencies. Services also traded; such as tourism, banking, consulting and transportation. Advanced technology, globalization, industrialization, outsourcing and multinational corporations have major impacts on the international trade.