Advantage and disadvantage of International Trade

Basically, trade between nations become necessary for the same reason that an individual engages in trade with another. No nation is so independent that it produces within its borders all that her citizens need. Butressing this point, Vaish (1981) observed that “since the creation of earth its inhabitants, natural resources and man’s innate abilities were not uniformly apportioned by the Almighty God to all parts of the globe and to all persons and since techniques of production do not advance at equal rates among all nations, regional specialisation in production offers ample scope for international trade.

International trade is, therefore, of much benefit to both consumers in term of improved satisfaction and living standards, the country and the word in general in terms of better utilisation of the world resources and increased international understanding, which helps to promote world peace.

One of the outstanding benefits of international trade is that it encourages international division of labour and specialisation, which in turn increases the wealth of the nation.

By encouraging specialisation, more goods and services are produced, and at reduced prices. This re- duces the monopolistic tendencies of local suppliers. International Trade also make it possible for each county to have access to world’s raw materials and other resources, which the Almighty God had distributed unevenly to various countries.

Ahukannah et al (1992:45) pointed out that foreign trade makes possible the importation of machinery and spare parts needed for local production and for the operation of local industries.

Oyebola (1977:154) also added that “under international trade, there is a free movement of skilled labour between different countries of the world”. As we know, in developing countries like Nigeria, local industries still depend on technological transfer from the developed countries, without international trade, this will not be possible. It, therefore, accelerates economic development, especially the developing world where modern equipment can be used for industrial and agricultural purposes.

The developing world gains in technical knowledge from the more advanced world. International Trade attracts foreign investment to Nigeria.

International trade provides revenue for the countries concerned. In Nigeria for example, import and export duties form a great percentage of the total revenue from taxes.

Another advantage of international trade is that it provides employment for many inhabitants of the coun- tries concerned. For example, many people in West Africa are engaged in importation and exportation of goods.

Students Assessment Exercise

1. Comment on the view that an extension of international trade will raise the living standards of all those countries which engage in it. 
2. Should two countries trade if one of them is more efficient at producing everything? 
3. Why do countries trade with each other? 

 Disadvantage of International Trade

Despite all the advantages of trade between countries, it is criticised on the basis of some observed disadvan- tages.

1. Any nation that is solely dependent on the sale of a single major product is liable to adversities of a decline in world demand for the product e.g. the monoeconomies of Nigeria and Ghana which depends solely on crude oil and cocoa respectively.
2. Economically, weaker nations are likely to be dominated by the more advanced countries of the world. West African nations are subjected to economic subservience by their former colonial masters. 
3. International trade leads some nations not to make serious efforts to be self-reliant.
4. International trade can also lead to over-production of goods and services, which can rise to depression. 
5. It breeds mistrust, suspicions, jealousies and unhealthy competition among countries and these have often accounted for wars and other forms of unrests in the world. 
6. Over-dependence of some countries on others for the supply of some products may result in lack of development of knowledge and skill along the lines of the dependant nations. In times of war, dependent nations economically can be at great disadvantage. 
7. Some economies concentrate on the production of certain commodities at the expense of many essen- tial ones. It could be a source of handicap in times of war. This is because the other country can place an embargo on these goods that the nation highly depended upon.
8. The next argument is that international trade can stifle local industries and cause unemployment to result from such industries. It is also said to cause economic instability because the economic problems of a supplier country may affect the buyer country. Moreover, goods that are currently imported at lower prices can rise in prices in the future. 

Students Assessment Exercise

• Explain the disadvantages that can be experienced from foreign trade or international trade and the principal difficulties, which can arise.