Home List of Pros and Cons 6 Pros and Cons of International Trade

6 Pros and Cons of International Trade

International trade is not always popular with domestic audiences but it is responsible for moving goods and service across the globe as well as expanding opportunities for economic growth. There are some obvious benefits of to international trade that are on display every time we visit a grocery store or shopping mall and find products from all over the world, however this policy also comes with some very well known costs.

The Pros of International Trade

1. Comparative Advantage
One of the foundational principles of economics is that production of a good or service should not necessarily come from the place that can produce the most output in absolute terms, but should come from wherever is relatively most suited to the task when compared to the most valuable use of resources in different locations. This concept can seem complicated but it underpins the economic logic supporting international trade.

2. Diplomacy
Countries that trade together are generally less likely to engage in conflict with one another than those that do not. There are exceptions to every rule but international trade promotes diplomacy by fostering engagement between cultures and countries. The connections these form between governments, individuals, and businesses then produces common interests that promote stable relations.

3. Increases Choice and Opportunity
Today, corporations and consumers have grown accustomed to using foreign goods or selling their products abroad. This growth in choice and opportunity is a direct result of the expansion of international trade that has taken place as a result of technological progress as well as breaking down protectionist barriers.

The Cons of International Trade

1. Unemployment
While international trade is generally assumed to promote growth across an economy, certain sectors lose out as a result of new competition or take the opportunity to move production to a lower cost location. The unemployment this produces can be particularly acute in certain sectors, such as heavy manufacturing, and can leave segments of the population resentful of the changes.

2. Environmental Destruction
International trade can have devastating effects on the environment. From the destruction of local ecosystems in search of raw materials to the pollution produced by transporting products across large distances, there are many ways that trade policy impacts the planet. Environmental concerns are increasingly raised in trade negations and incorporated into the final agreements in recent years.

3. Loss of Local Producers
Aside from the unemployment that comes follows companies going out of business or moving overseas, the production of certain goods and services can define the culture as well as economy of many regions. When these are lost, the value is often hard to quantify.

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