Benefits and Costs of International Trade

International trade can help and hurt a business or a government. When a business decides to trade internationally there are a whole new set of rules and procedures to follow and different cultures to adapt to. A business like Tesco has to be prepared to understand numerous factors before deciding to operate in a certain country. They cannot rush headfirst into a country expecting them to like the same things that English people like. Even the layout of the store may have to be changed to suit a certain country or the products sold may be promoted in different ways etc.

An example of this would be in a Japanese shop David Beckham may be advertising chips but in Iran a different person more well known in the Arab world. International trade brings with it all of these things. These can help an organisation immensely but at the same time it brings with it a lot more work and pressure. When a company like Tesco trade Internationally the market grows substantially because they are selling to a lot more people that they were before, this also means their turnover will rise with it. Choice in the market has risen because more products are available to buy so consumers are not restricted to certain products.

More trade takes place because a larger market entices businesses to trade more. Price has been drastically affected because some overseas businesses can offer products cheaper than in Britain so British producers take action and lower prices also which then creates competition. Quality of products differ for example Belgian chocolate is seen to be the best tasting chocolate so thanks to International trade consumers can now buy chocolate straight from Belgium. The above are all costs of International trade. Companies such as Tesco and Nike etc. have all these things to account for when they trade overseas.

Disadvantaging developing countries is a complicated, harsh but true process. A Company like Tesco may decide to buy their wheat from Kenya, they pay the farmer 2000 for the wheat and sell the same wheat for triple that price in developed countries. Taste is different for different people around the world so companies must make sure that they study and can understand a countries culture and tastes.

Environmental issues are very important because increased International trade means the world will become more busy and must transport more things across the world, by planes, cars, trains etc. so pollution will increase as well as many other things. Exploitation of workers is a highly common subject found in non developed countries things such as low wages, poor living conditions if any at all, lack of food etc. Free trade is a term that describes the transaction between certain countries that have an agreement not to pay any tariffs or quotas. A good couple of examples include the European Union and NAFTA. Both these alliances have agreements with each other to let all the qualified countries trade without having to pay a price to the government of the country.

The European Union consists of countries such as UK, France, Germany, Spain etc. and NAFTA consists of U. S. A, Canada and Mexico. Comparative advantage is when a country specialises in making one product. The country will benefit from making the one commodity that they are good at rather than concentrating on making something they are average at. For example France is good at making wine so if they continue to make wine they can trade with a country like Brazil who is good at making coffee.