International Trade: Definition, Benefits, Role Of E-commerce, And Careers To Explore

For many years, international trade has remained a vital aspect of most nations’ economies.

Its roots can be traced back to the time when ancient civilizations established trade networks to acquire goods and resources that they could not source locally.

The advent of the internet exploded international trade relations as e-commerce and information technology made the world a global village market, redefining the concept and scope of international trade.

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What is international trade?

International trade is a business transaction that involves the exchange of a good or service between at least two different countries.

The exchange is generally categorized as either import or export. Import includes goods and services purchased by a country or its citizens from another country. Exports include domestically produced goods or services sold by a country or its citizens to the global market.

Different countries are blessed with different assets and natural resources. The availability of these assets and natural resources allows some countries to offer certain products or services cheaper, thereby attracting foreign demand.

Understanding modern-day international trade

The volume of international trade has increased dramatically in the modern age, with more economies becoming reliant on exports.

However, more growth in trade volumes is recorded for developing countries. International trade is usually necessitated by differences in certain areas among nations, such as technology, education, government policies, labor laws, wages, and natural resources.

Most successful global companies have managed to leverage available assets and natural resources in their country of operation with an understanding of the different trends in supply and demand across the globe.

E-commerce and international trade

Electronic commerce (e-commerce) has created many opportunities for all countries to reach the global market. eCommerce provides avenues for businesses of all sizes to access a global customer base that was once only accessible to multinational corporations.

With a few clicks, customers can purchase products from any part of the world from the comfort of their homes.

E-commerce platforms not only make purchases and payments for products easier but also provide seamless logistic services such as doorstep delivery, thereby offering an enhanced customer experience.

Benefits of international trade

International trade occurs because countries benefit from certain advantages of these relations. Two main theories highlight the benefits of international trade: comparative advantage and absolute advantage.

Comparative advantage

The comparative advantage theory explains why countries can benefit from trading with each other by focusing on the production of a good or service they are best at making while importing things they can get at a lower relative cost from other countries.

It was created by the British economist David Ricardo in the 19th century. He explained a typical example that shows how England and Portugal could benefit by specializing and trading according to their comparative advantages.

Portugal has many vineyards, which enables it to produce wine at a low cost. On the other hand, England is said to have pastures with lots of sheep.

International trade between Portugal and England would allow Portugal to import cheaper clothes, while England could also get quality wine at a cheaper cost. The two countries will be able to focus on what they are best at making instead of attempting to make products that will be expensive to produce.

Absolute advantage

The absolute advantage theory explains why a country can benefit from attracting foreign demand for products and services in a large quantity compared to any other country considering the use of the same quantity of resources.

The concept was created by Adam Smith, a Scottish economist and philosopher in the 18th century.

For example, if Japan and Germany can produce automobiles, but Italy can produce sports cars of higher quality in record time with greater profit, then Germany is said to have an absolute advantage in producing top-quality sports cars.

Careers in international trade

Country governments and companies are always in search of skilled workers with international trade degrees such as a diploma in international trade.

An international trade degree prepares students to function effectively in any position that involves international trade of goods and freight forwarding.

Students during the program learn how imports and exports work and the different factors that facilitate international trade.

Depending on the school curriculum, some international trade degree programs also include courses that train students on how to use technological tools for the efficient management of an international business.

Some of the jobs available for international trade degree graduates and their average salaries per year include: