With globalization now seen as being widespread everywhere, every nation is now seen of using this word to its advantage, this being mainly in getting involved in a number of trading activities. That is from trade of products to even trade of services.
This essay over here would share as to what trading is all about and how important it is for a country to be involved in such trading activities. Series of examples would be used to make the comprehendible whereby precise but yet logical information would be shared so as to understand the worth of international trade in today’s market place at its best.
Trade, one such word that in past was better known as falling under a barter system, carries a total new approach. This being exchange of goods from one country to another, which involves transactions of monetary worth (Nelson, 2000; p. 3).
It is a process where the country that initiates trading activities, chooses one such product or service where it specializes in, and then exports it to the other country, that needs that product, since it does not specialize in the same manner, as the country from which the product/service is being exported. In this regard, trading of activities would be only seen when one country has effectively met its desired output to export its products/service in which it specializes in or import a product/service where it needs the specialization of others.
Having known of what is stated above, the relationship of international trade and world output hence can be best described as being a directly proportional one. That is greater the level of world output, greater would be the trading activities (International Trade 2010), provided that whatever produced carries a worth or in other words demand in the international markets. However many would not agree, that whatever produced can be used for trading, but Ricardo’s principle over here can be injected into the study so as to leave minimum ambiguity over how and when trading of product/service takes place.
Ricardo’s Theory (Mankiw p.58 2008) clearly states that in order to initiate trading activities, countries could only see a trade link being achieved, when it only trades products or service that it specializes in, whereas the importer too on the other hand also carries a need for this consumption for which the product/service is being exported by that country.
The broad perspective of trade in this regard can be said as being summed up on the basis of needs and wants of one country to other. Where one country would only be involved in trade if it sees a surplus of output and that too in the area where it specializes in, whereas the other half, that being the importer, would only accept the exchange of goods in terms of monetary transactions, if there is a demand in the domestic market for that product/service.
In international trade, trading can be either of a product or even a service. Products can take any form from raw materials to semi finished products to even finished products. However when talking about services this could involve both carrying tangible and intangible properties, that is from human capital to even virtual services, such as virtual education programs, that are involved in trading of education from one country to another. With such a diversified list of products/services involved in trading activities, cutting of the trade links would either result in dismantling the economy of that specific country, due to the fact that, not every nation can produce everything and not every nation can provide all the services to an audience, that now is termed as being well diversified all ranging with an even diversified set of needs.
However, if trade links were cut in America than this would involve shortage of products for example in the form of spices that are imported from Asia, Indonesia, China, Mexico, Canada (Spice Market p.1 2010) and fruits that are imported from different countries and many others. This shortage would thus result in consumers either shifting to substitutes, where even after no appropriate substitute is found of being available, then resulting in dissatisfying the needs and wants of the society in general that would then create a havoc, and result in consumers either shifting from one country to another, so as to fulfil one part of their basic level need that being food.
However, apart from shortage of products, cutting of trade links would also result in shortage of services in America, where this would result in a great proportion of downfall in the service industry. Example call centre industry where human capital is taken virtually from India (Outsource2India 2010) to even others where various professionals from different walks of life are called so as to avail their specialized services.
In Conclusion the above information provided a detailed know how of what trade is all about and its importance. The examples that are shared above being just brief where on the whole cutting of trade links would result in shortage of both products/services, since not every country can produce all what is required, and if it can, then not every country may be seen of satisfying its customers’ needs, from a wide range of services, since human capital itself as residing in any country, can never be regarded as being jack of all.