A Nation's Trade in the International Market

International Trade is being defined as the procurement, selling, or exchanging of products, goods and services across national boundaries. The International Trade is considered to be of great importance to a nation if upon examining its economy's trade relative to the total international output, the worth of exchange that passes through its borders surpasses the amount of their own production.

There are so many great advantages of a nation joining the International Trade, one of which is that it opens the doors to new industrial and capitalist breaks. Another is that it inflates (creates a variety of) the choices of consumer goods and services. Also, it is able to create jobs for all the joining nations. It was estimated by the U.S. Department of Commerce that for every $1 billion increase in exports, 22,800 U.S. jobs are created. (Source: Chapter 5: International Trade International Business, Fall 2006, Instructor: Rolf, page 1, from http://www2.dsu.nodak.edu/users/rbutz/International%20Business/ PDF/CHAPTER%205%20outline.pdf)

In the International scene, nations are said to accumulate more financial profit by exporting more products than importing them. The term Trade Surplus refers to the condition wherein the nation's exports are of much greater value than its imports, the term Trade Deficit however refers to the exact opposite. This is the theory of Mercantilism, which of course is being followed by the nations joining the International Trade.

A nation is said to have an Absolute advantage over the other nations in the International Market if given the same or even fever amount of resources, it can produce a greater output (in both quality and quantity) of goods and services.

International trade is considered as the backbone of our contemporary, commercial world. This is due to the fact that producers in diverse nations try to profit (and are already gaining) from an expanded market, rather than be restricted to trade within their own boundaries. Nations have decided to make a pact and trade among themselves because of the following reasons: (1) International Trade supports specialized commerce, (2) Trade Surplus is being encouraged and is highly imposed, (3) International Trade entails lower manufacture costs in one nation than the other.

Specialized Industries that are developed due to national tradition and/or talent is greatly supported by the International Trade. So, even if some consumers prefer to purchase less expensive products, they're still enticed to spend more because of this factor. Let's take Swiss watches as an example; even if Asia mass-produces watches, price-competition can never exist. Regardless of the prices, there already is a strong and established market among a certain group of consumers for the endurance, quality and even the "snob-appeal" that possessing an Audemars Piguet or a Rolex offers. Scottish wool , German cutlery, fine French silks such as Hermes, English bone China and other products such as these can always get through the international trade scene successfully because consumers around the world are willing to promote the importation of these goods to satisfy their notion that specific countries are the best at making specific goods.

The improving significance of International Trade is replicated in the rank of world exports explicitly expressed as a fraction of total world financial output. This percentage grew considerably over the last 10 years and is estimated to continue growing in 2006 and 2007 (see Figure 1- World Exports - as quoted from IMF World Economic Outlook - http://www.imf.org/external/pubs/ft/weo/2008/01/pdf/text.pdf)

Trade and the World Output

Decelerating world economic productivity slows down International Trade, accelerating output impels trade. Trade will slow down in a severe economic recession wherein consumers are uncertain about the future and thus, buy less. During this period, the currency is weak (a nation's monetary system loses value); thus, imports are slow and are more expensive while domestic products a little more reasonably priced. This shows how the amount of world output greatly influences the amount of International Trade. But even though Trade and the World Output are strongly related, Trade continues to grow more rapidly than the World Output.

According to the experts, the world economic growth is consistently strong in 2005, where growth percentage is at 4.8%, which is way over the 4.0% average yearly growth documented in the last 10 years (see Figure 2 - World Economic Growth - as quoted from IMF World Economic Outlook - http://www.imf.org/external/pubs/ft/weo/2008/01/pdf/text.pdf).

Over the last 10 years, the world economy has documented a strong economic growth, except for the two periods (1998-1999 and 2001-2002) when financial growth was below average. The deceleration in the fist mentioned period was due to the crisis in the Asian financial economy that affected many Asian countries. The other period's slowdown was associated with the terrorist attacks, geopolitical uncertainties and the downturns of the world's biggest economies including Europe, Japan and the United States. Recovery from these slowdowns was seen as the economic growth rebounded well above the average growth rate since 2004 until the present.

Trade Dependence and Independence

Here is an illustration of the factors that can affect International Trade Interdependencies (see Figure 3 - Factors that affect International Trade) wherein there is total dependence on another nation at one end and total independence from other nations at the other.

International Trade Pattern

Approximately sixty percent of the World's Products Trade comes from high income-generating countries while about nearly thirty four percent comes from the trade between high income and low and middle income-generating nations, and the remaining six percent comes from the trade between the low and middle income-generating nations. With this knowledge, we can already determine who is trading with whom. Knowing this is important because it allows nations to identify whether or not there is a noteworthy level of trade between the richest and the poorest countries in the world, as well as among poorer nations. International custom agencies were able to gather this information by recording the sources and destinations of imports and exports, as well as the quality and quantity of the products that cross between borders.

Imported Products

Imports to Dubai

If the world suddenly stops international trading, what will Dubai lose?

Canada is one of the top-most important trading partners of Dubai. Dubai's overall non-oil trade with Canada reached Dh921.7 million in 2004. The overall value of the county's imports from Canada reached Dh788.4 million during the year, while its total exported goods worth Dh77.2 million. (Source: Dubai Chamber of Commerce and Industry (DCCI) as quoted from Dubai's total non-oil foreign trade with Canada reached Dh921.7 million in 2004. According to statistics compiled by Dubai Chamber of Commerce (Khaleej Times - 21/09/2005) from http://www.menafn.com/qn_news_story_s.asp?StoryId=107874).

Dubai's imported products from Canada include machineries, electrical equipment, mechanical appliances, natural or cultured pearls, vegetables, wood and precious or semi-precious stones and metals. Thus, when the trading between our country and Canada stops, we will not be able to acquire the aforementioned commodities.

India is another leading trade partner of Dubai, for India is the top exporter of Dubai's gold and diamonds (just close second to China). Next to India as the leading trade partner of Dubai is Switzerland where Dubai imports non-monetary gold ingots in inwrought forms.

Imports to the United States

If the United States is to stop trading with all other countries in the world, many of the comforts and luxuries that they have grown accustomed to would no longer be obtainable for them. Germany won't be able to export its German Lagers and ales to the country. If the United States is to stop trade with countries like Chile, and Brazil, Americans would be unable to enjoy products like cocoa and tea, coffee, various spices and herbs, dried fruits and nuts and most tropical fruits and vegetables (fresh and processed form like pulp, fruit juices and concentrates. Americans would have to live a life without their favorite foreign cars like the Jaguar or the Ferrari. There'll be no Italian leather for Italian leather shoes or handbags. China and Japan will stop exporting certain brands of televisions and DVD players.

Conclusion

If the countries all around the world suddenly decided to stop trading with one another, it would cause extreme disorder. International trading is a very important aspect of the world's economy. Without it, many of the world's biggest and most financially stable countries would suffer because many of the basic comforts that nations import from other countries would no longer be available, choices would be minimal or in some instances, there would be no choices at all. The poorer nations will suffer too because they will have no real source of income. Stopping trade will cause deep recessions and countries drowned in poverty and hunger.

References

1. International Trade: What Is It Really? (By La'Sarah Motley , December 9, 2005) - http://www.associatedcontent.com/article/15777/international_trade_what_is_it_really.html

2. Chapter 5: International Trade (International Business, Fall 2006, Instructor: Rolf) -
http://www2.dsu.nodak.edu/users/rbutz/International%20Business/PDF/CHAPTER%205%20outline.pdf

3. International Business by Wild - http://www.wvup.edu/jcc/intlbus/pptpresentations/ch05_files/frame.htm#slide0029.htm

4. Dubai's total non-oil foreign trade with Canada reached Dh921.7 million in 2004. According to statistics compiled by Dubai Chamber of Commerce (Khaleej Times - 21/09/2005) - http://www.menafn.com/qn_news_story_s.asp?StoryId=107874

5. Dubai's trade boosted by precious metals last year - Business Times (BY A STAFF REPORTER - 6 September 2005) -
http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/business/2005/September/business_September123.xml§ion=business&col=

6. USA's Major Trading Partner - http://www.2ontario.com/welcome/cowr_300.asp

7. Imports may boost USA's flu shot doses (By Rita Rubin, USA TODAY) - http://www.usatoday.com/money/industries/health/2004-10-28-flu-shots_x.htm

8. Importance of International Trade - http://www.moneyinstructor.com/doc/internationaltrade.asp

9. The increasing importance of international trade - http://www.export.qld.gov.au/dsdweb/v3/guis/templates/content/gui_cue_cntnhtml.cfm?id=47590

10. International Trade and Export Performance from http://www.export.qld.gov.au/dsdweb/v3/guis/templates/content/gui_cue_cntnhtml.cfm?id=47564