Advantages and Disadvantages of International Trade

With the emergence of many economic approaches during the past decades, none of them did support the idea that international or foreign trade, both exports and imports, provide net benefits to developing countries. These approaches concluded that developing countries could not be reliable as a major driving force for the development process. This is because developing countries will suffer from a deterioration in their trade exchange rates over time, due to the transformation of increased productivity in developed countries into an increase in wages, while increasing productivity in developing countries will lead to lower prices. This means that developed countries benefit from increased production, as well as access to goods and services at low prices from developing countries. On the other hand, the developing countries suffer from the difficulty of providing imports of consumer and capital goods due to their high prices in the developed countries. One of the most prominent defects caused by international trade at the state level is economic dependency, particularly in poor countries, as they depend on developed countries for their economic development. This often leads to economic exploitation, while turning those countries into a source of raw materials without developing their manufacturing industries. Political dependence is added to economic dependence in the event that the influence of developed countries increases and their penetration into the economy of poor countries. Hence, international trade encourages slavery and weakens economic independence, which threatens political dependence.

Another disadvantage of international trade is the misuse of natural resources as excess exports deplete a country's natural resources in a shorter period than they would otherwise. The import of counterfeit medicines, luxury items, etc. negatively affects the economy and people's well-being. International trade may also generate competition between countries due to competition in foreign markets. This could eventually lead to wars and a threat to world peace.

On the other hand, some economic approaches have concluded that international trade plays an important role in the economic and social development of all countries without exception, especially in countries that have made an industrial choice directed abroad. This was considered one of the evidences of the role of exports in driving economic growth through its direct and large reliance on exports in marketing its products. Moreover, oil export revenues are one of the main, if not the most important, factors determining economic growth, as they contribute to the import of advanced technology, the recruitment of trained foreign labor, and the provision of imports of consumer and capital goods necessary for the production process. Oil revenues also contribute to financing production projects and building infrastructure and public utilities.

Country-level exports are significant in that they bring foreign exchange value to the exporting country, which is mainly required to pay for the import of capital goods, raw materials, spare parts and components as well as the import of advanced technical know-how. Exports also enhance international relations as almost all countries of the world wish to thrive in a peaceful environment. Exports are one way of maintaining political and cultural relations with other countries. Exports, especially those that constitute a large volume of GDP, also solve the balance of payments problem and enable countries to obtain an adequate balance of payments. Therefore, countries are working to remove the deficit in the trade balance and balance of payments through exports. The economic approaches also showed that the country that occupies advanced ranks in the field of exports enjoys a lot of respect, goodwill and reputation from other countries. For example, Japan has an international reputation for its high-quality products in export markets.

Export trade requires more production, which opens doors to more employment opportunities, not only in the export sector, but also in the sector integrated with it like banking, insurance, transportation, etc. Exports also promote economic and industrial development, as the labor market grows and thrives quickly if it has access to international markets. Exports also enable the optimal use of resources, which is evident in the supply of oil and petroleum products in the Gulf countries, which exceeds the domestic demand. Accordingly, the surplus production is exported with the optimum utilization of the available resources. In addition, due to the export industry, other sectors are also expanding like banking, transportation, insurance, etc. At the same time, a number of auxiliary industries appear to support the export sector that is called economically the spreading effect. A higher standard of living is also provided to the population, as the export trade requires more production, which in turn leads to more employment. More labor means more purchasing power, and as a result, people can enjoy new and better goods, which in turn improves their standard of living.