The Benefits of International Trade, Driving Factors, and Its Impacts

Benefits of International Trade Quoted

from the book “Macroeconomics: An Introductory Theory” by Sadono Sukirno, here are four benefits of international trade:

1. Meeting Domestic Needs, A country may not be able to meet all of its domestic needs, which can be due to geographical conditions, climate, and other factors. Even if it can produce goods domestically, production may not be efficient, making it easier to import from other countries. With international trade, countries can meet needs that cannot be produced domestically.

2. Gaining Benefits from Specialization, The second benefit is gaining profits through specialization. A country may be able to produce a similar type of goods as another country, but sometimes it’s better for that country to import the same type of goods from abroad.

3. Expanding Markets and Increasing Profits, Many entrepreneurs strive to expand their business markets to maximize profits. This may involve expanding business internationally.

4. Transfer of Modern Technology, The final benefit is that international trade can be utilized for the transfer of modern technology. By importing modern technology goods from abroad, a country can more easily learn more efficient production techniques and modern management methods.

Driving Factors of International Trade According to the Ministry of Education website, here are several driving factors for international trade:

1. Differences in Natural Resources, Each country has different natural resources, which also differentiate the production outputs of each country. For example, Indonesia produces palm oil, while Saudi Arabia produces crude oil, so they can trade with each other.

2. Differences in Human Resource Quality, High-quality human resources are needed to manage natural resources. Countries with high-quality human resources will produce high-quality goods and services, which are needed by other countries.

3. Differences in Science and Technology (Sci-Tech), Along with high-quality human resources, a country usually masters science and technology (Sci-Tech). If a country can master Sci-Tech, it can produce higher quality and more efficient goods and services.

4. Differences in Culture, The cultural differences of each country influence the products produced. For example, Indonesia has high-quality batik products, which attract other countries to buy them.

5. Differences in Prices of Goods, Production, and Preferences, Prices of goods may vary in each country due to differences in raw material prices or efficient production processes. Sometimes, instead of producing goods domestically, a country chooses to import cheaper goods.

Impact of International Trade Quoting from the book “Economics Module for Grade XI” (2020) by Sri Nur Mulyati SPd, MM, some advantages and disadvantages are the impact of international trade, as follows: