The Importance of International Trade

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International trade is a valuable way of a countrys domestic market. This is due to the fact that with its help, labor productivity increases, and the total volume of production increases. Moreover, States whose enterprises and organizations export their products to other countries have a significant economic advantage due to the development of specialized industries. These productions have higher efficiency compared to countries producing similar products. Thanks to international trade, the countrys domestic economy can achieve a more efficient allocation of resources and a high level of well-being of the population.

In the context of globalization and rapid development of the world economy, imports and exports to other countries determine the development of the goods market. Okyere and Jilu underline that international trade enables producers and retailers to search for foreign-produced goods, facilities, and parts (p. 130). Foreign trade provides an increase in income with the same production opportunities. Without it, an increase in the financial component would require an increase in the countrys resources. It is worth noting that states benefit from trade with each other only if they specialize in producing goods for which they will spend fewer resources and finances than their trading partners.

Exports have a significant impact on the demand and supply for certain goods. Thus, the increase in prices within the country makes products less accessible to other countries, thereby reducing exports and increasing imports, reducing demand. An example of this can be soybeans production and distribution to the countries where this product is hard to manufacture. Therefore, exports increase the level of demand and supply and contribute to the development of foreign trade. The sale of goods to other countries leads to economic growth by stimulating buyers demand for goods and supplies.

The countrys competitiveness in the international market also depends not only on exports but also on imports. The high level of this economic indicator indicates stable domestic demand and a growing economy. Moreover, imports represent the main production assets as organizations can bring equipment manufactured by the iPhone company, which is even more favorable for the country since such production assets will increase the economys productivity in the long term.

The formation of a competitive economy of any country is impossible if it is isolated from foreign market participants. Expanding the sale of goods to other countries and creating favorable conditions for their promotion is an integral part of the export policy. The export of goods gives the countrys competitiveness such advantages as close ties with other states, which will contribute to the acquisition of new technologies to increase production efficiency. Moreover, there will be an improvement in the balance of payments, the development of new markets, and conditions for participation in international competition. It is worth noting that, on the other hand, the greater the States participation in world imports, the lower its competitiveness on an international scale.

The presence of demand for it evaluates any product provided to the market. The equilibrium market price is the value at which the quantity of goods from the manufacturer corresponds to the number of consumers who want to receive them (Yang et al., 2021). Achieving such a level of value means that the market is balanced, there are no signs of shortage or oversupply.

The goal of any country is to maximize profits for the sale of certain goods and expand the scale of economic and industrial activity. If the supply of a product is more significant than its demand, then the competition between sellers increases. Any changes in the competitive position of the countrys market have an impact on this indicator. The equilibrium price is calculated over a certain period to determine which goods are in excess and where there is a shortage leading to the decline of the economic market. Based on this information, an actual selling price is formed to improve the situation of the country. The equilibrium quantity is the value of the quantity of the product at which the supply price is equal to the demand price (Muir & Borovkov, 2017). An increase in demand, that is, an increase in the products competitiveness, increases the equilibrium quantity of it. It is also worth noting that the increase in supply reduces the equilibrium price and increases the equilibrium quantity.

A monopoly is a type of market in which there is only one seller of a particular product. This process has some significant negative consequences. Among them is a decrease in the level of competition, a decrease in the volume of manufactured products and an increase in its price, and a slowdown in the technological progress of enterprises and organizations. Moreover, monopolistic actions suppress small and medium-sized businesses. The States export monopolization activities are based on the control of operations in foreign markets. Some requirements concerning foreign trade interactions of countries may entail additional costs for exporters.

Opening for trade directly affects the internal monopoly of the country. By applying game theory in its practice, an organization can predict the actions of competitors, which is an advantage and increases competitiveness, reducing the adverse effects of market monopolization. Perfect competition is also the opposite of monopoly since, in such a market, there is an unlimited number of sellers who produce similar goods and do not affect its price. Thus an additional competitor can lead to a market outcome similar to perfect competition; however, such a notion is almost impossible to appear in the current market. The State also does not influence the market, as this may affect the number of sellers. Moreover, the volume of manufactured products may decrease, which will affect the price of the goods. Under such pressure, the market can either become an oligopoly or another form of imperfect competition.

References

Muir, E. V., & Borovkov, K. (2017). Approximating the equilibrium quantity traded and welfare in large markets. Stochastic Models, 33(3), 411-429.

Okyere, I., & Jilu, L. (2020). The Impact of export and import to economic growth of Ghana. European Journal of Business and Management, 12(21), 130-138.

Yang, B. Z., He, X. J., & Huang, N. J. (2021). Equilibrium price and optimal insider trading strategy under stochastic liquidity with long memory. Applied Mathematics & Optimization, 84(2), 1209-1237.

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