Global Flows of Goods and Services

One benefit of international trade is the specialization in producing goods. With international trade, countries will be importing
and exporting goods and services between each other. Therefore, a country can focus on producing a certain good that has a
lower cost of production due to lower costs of resources, which means that they can produce more and also sell the goods at a
lower price.
In the case of the rice production, producing rice in Thailand is cheaper due to more land, than producing rice in Singapore,
which is facing land scarcity. Thus, Singapore benefits from this international trade because rice can be available for everyone
here at a cheaper price. Furthermore, resources can be used more efficiently, as Singapore can use the land for other uses
which it specializes in such as research and development.
Some Benefits of International Trade.
Spread of business risks
Promotes higher level of economic growth
Helps in the integration of global economy
Aids in the transfer of technology, skills and entrepreneurship.
Generate economies of scale by widening the exten of the market
Allows specialization to take place.
Induces innovation and raise productivity.
Some Costs of International trade.
Exploitation and poor welfare of labour
Environmental impacts in desperation for profits.
Cultural identity issues
Japan is specialized in making the YKK zip which is exported in high volumes to several countries in clothes making. This also
means that in Japan, there are several jobs for people in its factories to meet the demand.
Brazil has resulted in excessive deforestation to cater space for multinational corporations. This has resulted in the loss of jobs
for farmers and also damages to the environment.
Another benefit of international trade will be that the locals will be able to enjoy a greater variety of goods and services. With
the imports of products around the world,countries will be able to enjoy goods from readily than before. For example, Singapore
lacks natural resources, hence we depend on International trades for our poultries, vegetables etc. Without international trade,
citizens will be unable to enjoy the large varieties easily.
Also, international trading helps to increase job employment opportunities, hence possibly rising income.
A downside to it would be the dependency on other countries for resources which pose a problem for countries which are highly
dependent on other for countries. Local businesses will also face competition from imported products, hence causing the
demand to fall. It will also cause rising inequalities within a country.
International trade allows countries to specialise in the production of goods which they have a comparative advantage in.
Trading partners reap mutual gains when each nation specializes in goods it can produce with a lower opportunity cost and
then engages in trade for other products which it has a higher opportunity cost to produce. There is differences in factor
endowments among countries where different countries have different amounts of land, labour and capital. For example, Saudi
Arabia has the world's largest underground reserves of crude oil but lacks sufficient arable land for large-scale agriculture.
Thus, because of international trade, Saudi Arabia can specialise in the production of oil and engage in trade for agricultural
products. Furthermore, countries also benefit from economies of scale as the average cost of production of a good falls as
more goods are being produced. As a result, the effects of economies of scale for the production of goods and specialisation
from international trade both contribute to the increase in the overall efficiency for countries.
However, international trade inadvertently destroys the cultural identity of countries. Products carry their own cultural ideas and
message. By importing and export goods around the world, there is a slow erosion of the unique nuances in the local culture
due to the depersonalized consumer orientation of the world. For example, Nike and Microsoft etc. all sell products that
symbolize American values and reflect American corporate culture.
Firstly, international trade brings about rapid economic growth for countries that embrace it. Exportation and importation of
goods and services results in a rise in GDP. Singapore is an example of a country that has embraced the benefits of
international trade. By opening it's economy and carrying out free trade, Singapore has generated a large GDP and economic
growth from international trade. Countries such as China which were previously closed economies (not open to international
trade) also benefitted greatly from opening up their economy to international trade. Being a major player in international trade
has boosted China's GDP and increased the standard of living of the country.
Secondly, international trade benefits Transnational Corporations and Multi-national Corporations who place their production
facilities overseas as part of the global value chain. By producing according to comparative advantage, these corporations are
able to maximise their profits. For example, by placing low-end manufacturing processes in less developed countries such as
South Africa and capital-intensive processes (e.g. R&D) in developed countries such as USA, Nike has benefited from

international trade and continues to maximize their profits.

A limitation of international trade would be that it threatens domestic industries if these industries are unable to compete with
foreign companies. With increased international trade, borders are blurred and goods and services are increasingly mobile.
This increases the competition faced by domestic industries as foreign industries become a major competitor for demand. If
domestic industries are unable to compete, they will be forced to exit the market. For example, there was a dumping of shrimp
in the US market by countries such as Thailand, India and China. Domestic producers of shrimp in the US were unable to
compete with the extreme low prices and faced severe losses.
I think one concern about international trade is allowing MNCs to exploit cheap labour from developing countries. Work
environment of workers in factories in China and Vietnam are poor and detrimental to their health. However, in order to earn a
minimal salary, workers have to bare such conditions. These MNCs are also polluting the local environment because there are
holes in local environmental laws. The locals are unhapply also because the taxation does not go to the local government.
Many developing countries are suffering because they desire economic development so badly. Their future generation will
suffer.
The benefits of international trade are as follows.
Firstly, trade results in efficiency in goods production. Through the concept of comparative advantage, countries specialise in
producing the goods that they have a lower opportunity cost in relative to the other country. They then trade with each other
based on an appropriate terms of trade, realising mutual beneficial gains in good production and consumption. An example
would be that of Singapore which specialises in capital intensive goods like micro-chips. She thus could trade these chips with
rice which is produced in labour abundant countries like Thailand.
Secondly, international trade gives citizens of each country more choices in terms of the goods they consume. Without trade,
this would definitely not have been possible. For example, in Singapore, we might be stuck with wearing Bata shoes if the
international shoe trade were not present. However, it is precisely because of trade that we are able to shop for shoes like
those of Adidas, Nike etc.
The cost of trade are as follows.
Firstly, environmental hazards could potentially rise. Capitalism and trade are closely linked and with the possibility of realising
greater profit margins, firms would inevitably increase their production capabilities, possibly harming the environment in the
process. One good example is that of global warming which is caused by smog from factories.
Secondly, income disparity between developed and developing nations could rise too. It has been argued that due to the
various economic treaties and agreements, trade tends to result in greater gains for the richer nations than those of the poorer
ones. This notion is not very alleviating and i do hope that the WTO can find a solution to this issue at hand.
The benefit of international trade is the proliferation of goods and services across national and geographic boundaries. Trade
allows individuals to maximise their consumption utility since it allows them to consume goods that cannot possibly be
produced in a local context due to lack of resources.
International trade is brought about by the inherent unequal allocation of natural resources. This allows for the opportunity of
arbitrage since goods abundant in one country can be purchased at a lower price and sold for a higher price in another country
in which the good is considered a rare commodity. Arising from such opportunity of arbitrage, countries mobilise their resources
and leverage its comparative advantage to achieve economies of scale. Countries are therefore incentivised to open their
borders to export and import of goods/services on a regional/international scale.
The drawback of international trade are as follows
1.Trade arises from vesting of poltical, military leverage. From a historical perspective, colonisation of foreign territories was
deemed necessary to tap into more resources. Trade was imposed onto indigenous populations using military leverage, see
Bowring Treaty, Nanjing treaty.
2. At the heart of international trade are the actions of individual entities pursing their own interests. Societal costs of trade will
therefore fail to be accounted. This has led to the implicit export of pollution by outsourcing production factors to other
countries.
Case in point, Asbestos, a highly toxic material that is widely used in construction in developing countries. Its use has been
outlawed in most developed countries. Yet, extraction of asbestos still occurs today in countries such as Canada, Russia, China
.. etc. Asbestos is then exported to developing countries to be used in construction materials.
3. Unequal distribution of spillover benefits due to vested interests. Whilst trade has increased the living standards of
individuals in developing countries, developed countries still hold economic leverage. These economic leverage are vested in
the form of "intellectual property", factor immobility (labour movement) and purchasing power.
Intellectual Property : In theory, lower costs of production in developing countries imply that most if not all manufacturing should
be outsourced. However, to date, manufacturing in some industries such as aviation are assembly based. Intermediate goods
are still imported to be assembled at such factories. Intellectual property rights have been utilised to ensure that bulk of the
economic value remain vested into these intermediate goods and not into assembly manufacturing.
Case in Point, Civil Aviation industry (Manufacturing of aircraft for civillian use) , Aerospace industry, Pharmaceutical industry.

Factor Immobility. Countries impose tariffs and import quotas to protect local industries such as textiles (USA) and agriculture.
They may also incentivise local industries by giving subsidies or special contracts, see corn ethanol subsidies..
Purchasing Power: Developing countries that solely depend on manufacturing have limited bargaining power. This has resulted
in the widespread use of cheap labour in industries such as textiles (See Bangladesh).
Some of the benefits of international trade include
(a) Specialisation
Some countries have a comparative advantage in producing certain types of goods, hence they are better off specialisiing due
to the lower opportunity cost. If all countries specialise in a certain good that they are more proficient in, there will be a larger
quantity of goods available for consumption.
(b) Generation of Economies of Scale
Now, companies can produce on a bigger scale as the world is the market and this would invoke economies of scale which
helps reduce the cost of production, improving the profit margins.
Some of the costs of international trade includes
(a)Heavy interdependency on other countries
Situations in other countries will have an effect on the home country's economy. An example would include the 2007 global
recession which stemmed from US and affected the rest of the world including Singapore.
(b)Recession for certain sectors
With the introudction of overseas companies in the home country, they could bring along new technology which could spread to
domestic companies. Automation in sectors namely the agricultural and manufacturing sector slessens the need for unskilled
labour. Hence unemployment rises in low-skilled sectors.
Benefits of International trade:

Enhances domestic competitiveness. Local manufacturers will now have to compete with foreign imports and this may
force them to increase their efficiency or lose business.

Provide goods and services that cannot be found or are relatively difficult to obtain in the country (e.g Kuwait exports to
Singapore: Oil, Petrochemicals, Construction, shipbuilding materials. Singapore in return provides: Civil engineering equipment,
Electrical products).

Employment. Trade creates jobs and increases wages for exporting countries (e.g China providing textiles and
electronics to US). In return, importing countries such as the US benefit from the lower cost of goods.

Allows the diversification of economy. Influx of new technology allows the country to venture into new sectors of the
economy. This can also potentially increase the resilience of the economy by decreasing the dependence on particular sectors
to generate GDP.
Costs of International trade:

Threat to domestic companies that are unable to compete with the larger and more efficient foreign firms. These foreign
firms may have larger capital and lower average operating costs compared to domestic firms, thus giving them a natural
advantage.

Structural unemployment may occur in the short term. The agriculture industry may be adversely affected, when more
efficient agricultural machinery are purchased as a result of trade. Workers now become displaced by machines, resulting in
unemployment.

Increased economic volatility from international trade cycles, as economy now becomes dependent on global markets.

It cannot be denied that international trade has revolutionised the way trade works and has brought about many
effects. Positively, it has allowed the generation of economics of scale for countries and organizations that take part in
international trade. This is due to the widening extent of the market that can trade their goods and services. In addition, there is
the induction of innovation and transfer of technology. This is evident in developing countries like China. With the distribution of
Western brands of smartphones like Apple, China would strive to stay up to date in their mobile phone business as well,
encouraging companies like XiaoMi to innovate to compete with Apple. Greater amounts of international trade implies that there
is a reduction of trade barriers such as tariffs, which makes it cheaper for organization to trade. This could then translate to
lower prices of goods for consumers, leading to a lower cost of living.
However, one should not ignore the negative effects of international trade. The movement of factories to countries which have
lower costs of production might reduce costs of goods at the expense of the welfare of workers working in these factories. A
stark example would be the collapse of a UK owned garment factory in Bangladesh in charge of the production of clothing for
Primark. A total of 1100 factory works died when Rana Plaza collapsed.

A benefit of trade is the increased availability and choice of good and service to consumers. For example, Singaporeans can
enjoy coffee from Brazil, tea from India and Cocoa from Ghana due to trade.
Another benefit of trade is that of comparative advantage trade enables specialization to take place according to the countrys
resources. For example, Singapore focuses on the production of capital intensive goods such as microchips, while Indonesia
focuses on the production of labour intensive goods such as textiles.
A cost of trade is unemployment the import of technology and mechanics reduces the need for labour as it is more efficient.
Another cost of trade is that since economies are increasingly interconnected, a disaster in a foreign economy may have
adverse implications on the local economy. For example, Singapore suffered in the tourism industry significantly due to 9/11 in
2001 in the US.
The global value chain is the full range of activities ranging from a product from its conception, through its design, sourced
materials and intermediate inputs, its marketing and support to its final consumer. It is when activities are coordinated across
geographies.
Benefits:
Economic benefits. One of the benefit of international trade have been the major drivers for growth. Nations with strong
international trade have become prosperous. It has also contribute to the reduction in poverty. This is complemented by the
term comparative advantage whereby countries produce the goods which they have a comparative advantage in and trade with
countries that have a different comparative advantage. By doing so, both parties stand to achieve products that are lower in
costs and thus allocating their resources effectively and efficiently. This can be seen by the construction of Suzhou Industrial
Park and the Sino-Singapore Tianjin Eco-city. It can be seen that it is important to forged strong bilateral ties between countries
so that both parties stand to achieve mutual benefits such as transfer of expertise and technologies and most importantly
economic benefits.
Generate economies of scale. This induces innovations and raise productivity. One example could be the smartphone
manufacturers whereby Samsung and apple constantly innovate to fight for market share. As a result, consumers tend to
benefit by having newer and more advanced smartphone with new specifications and functions.
Costs
Financial burden. This happens when a country is facing economic instability causes a ripple effect to export-oriented
countries. This can be seen in the financial Asian crisis during 1997-1998. Due to the speculation of stock, this has caused the
market to be overpriced and thus causing pessimistic investors to sell off all their investment materials. As a result, this cause
many economies to face economic recession. The ripple effect can be seen when countries that faces recession which have a
negative growth in their GDP will tend to lower import good from other countries. As a result, export oriented countries like
Singapore will face a huge problem as the export industry in Singapore contributes to a large amount for their GDP. The erosion
of local culture and environment degradation can also be aruged as a costs.
Benefit from international trade:
Improve quality of life: technology improve humans quality of life. With international trade, the developing countries,
which do not have the capability to produce high-tech goods, could import high-tech goods from the well developed countries
which have better technology. For the developing country, in terms of costs and times, importing high-tech goods is relatively
cheaper than attempting to produce it. Hence, by importing high-tech goods, the developing countries could experience the
benefits of high-tech goods which are imported from the well developed countries. Real world example: country like Indonesia
which do not have the capability to mass produce high-tech mobile phones, could import mobile phones from countries like
United States or Korea. By having high-tech mobile phones, it would ease people who live in Indonesia to communicate.
Cost from International Trade:
Local company may lose in competition: People tend to choose good quality products. Hence, if the local companies do
not have the capability to make a similar or better product than the foreign competitors product, the local companies may losing
the market share. Real world example: Timor, car made in Indonesia, stoped its production due to low demand because people
tend to prefer foreign product.
International trade brings with it improved economic welfare, because it provides consumers in any country access to a greater
variety of goods and services, which hence provides greater satisfaction. For example, designer bags from Gucci, can not only
be purchased by consumers in Europe, but can be purchased worldwide due to international trade.
Trade has also allowed for the creation of a larger consumer base for firms, allowing them to generate economies of scale,
whereby a larger output can be tied to lower unit costs and this can increase consumer surplus in the process. Technical and
managerial economies of scale can be generated and such economies of scale are often harnessed by oligopolies such as
United Parcel Service and Intel.
Trade also facilitates competition because on the international stage, any firm faces a much larger number of competitors. This
helps to drive innovation and cost-cutting measures between different firms. This has been exemplified best by the global
smartphone industry, whereby there is cutthroat competition between larger firms such as Apple and Samsung, and with
smaller firms such as Xiaomi, for a portion of the smartphone market.

Global trade involves the export and import of goods and services between international borders. A fundamental concept
underlying global trade is the concept of comparative advantage. In a nutshell, the doctrine of comparative advantage states
that a country is able to produce a specific good or service at a lower opportunity cost than others.
The flow of goods and services globally brings about several pros and cons to a country's economic, social and political
development.
International trade enables domestic firms to engage in global sourcing - to source for cheaper production and hence be able to
increase cost competitiveness. By off-shoring production, firms are able to optimize their production processes beyond national
borders. In the long run, companies can achieve efficiency improvements through the presence of economies of scale in
production. In addition, international trade also allows firms to gain greater access to overseas markets. By tapping into
overseas market, firms can expand their market share and improve its brand's presence on a global scale.
The global exchange of goods and services also enables transmissions of ideas, cultures and values around the world in such
a way that it can extend and intensify social relations. This process can be represented by the common consumption of cultures
diffused by the exchange of commodities, the popular culture media and international travel. The circulation of cultures through
the exchange of goods and services enables individuals to partake in extended social relations that cross national and regional
borders.
While the global market has made it easy to buy and sell international goods and services, it also presents disadvantages.
Such trade can cause certain countries to be prosperous for a short time, but leads to economic exploitation, loss of cultural
identity, and even environmental degradation. Great hardship can be caused when production of goods for international trade
takes place at the expense of general populations welfare. For example, landowners in Nicaragua and El Salvador demand
farmers to give priority in harvesting coffee beans (due to its nature as a profitable cash crop) for exports instead of food crops
to fulfil their daily needs.
The ease of international trade have also made the imposition of trade sanctions for unspecialized goods little more than an
inconvenience. There may be initial pains as trade adjusts, but most commodities can be secured fromor sold tomore than
one market; similarly, global capital markets generally find substitutes when a single country places restrictions on the ability of
its companies and individuals to invest. Unilateral U.S. sanctions on Cuba are an example of measures that have contorted
international trade and investment, but not deprived the island-nation of either. Unilateral sanctions can still play a role in a
larger strategy, but on their own, they can end up creating more economic costs for the imposing country than for the targeted
one over the medium and long run.
In addition, the trading of precious commodities such as palladium, gold, oil or farmland have became tools to negotiate
bargaining power in cross-borders political conflicts. One of the key examples is the recent escalating political tensions in
Crimea, where the supply of palladium from Russia could be restricted. If sanctions are imposed on Russia, prices of the PGM
(platinum group metals) sector and specifically palladium would be affected. This could further impact most automobile
industries and markets for a number of commodities adversely. The international trade system could have been contorted at the
expense of countries' economic and social development when the extent of global flows of goods and services are being
manipulated to resolve cross-borders political conflict.
International trade enables specialisation and division of labour to take place and this helps to generate economies of scale and
improve productivity. For example, India and Philippines are known as the hubs of call-centres and many international
companies outsource their call centres to these countries. Apart from these benefits, international trade also allows for the
growth of a more integrated global economy which facilitates the flow and exchange of information and technology.
In terms of costs, international trade can lead to job losses in certain industries due to structural changes in the economy.
Hence, there is a need to upgrade and improve the skills of those in the affected industries to meet with the changing demands
of the economy. At the same time, at the border and behind the border trade costs are significant. For example, due to
international trade, the issues of terrorists, spread of diseases or even spread of insects like fruit flies are amplified.
There are trade of both goods and services on the international level.
In the case of Singapore, we are heavily reliant on the trade of services, we can account for up to 70% of Singapore's GDP.
This benefits Singapore as we are able to capitalize on our lack of natural resources, including space, allowing us to capitalize
on our human resource instead. (Comparative advantage) However, this also means that Singapore would be extremely
susceptible to events in this sector, and we would be hit hard by events such as recessions. Singapore attempts to combat this
loophole by diversifying our market partnes.
At present, Singapore's trade in goods of both parts and finished products. Our methods of trade are predominantly maritime
cargo and air cargo. These methods, combined with Singapore's efficiency and geographical position, makes Singapore a very
attractive trading partner with the rest of hte world.
Benefits:
Consumers benefits due to economy of scale thus lower price goods. And exporters/importer benefits.
E.g. China exporter of a variety of goods to US and many other countries. Importing countries such as US benefit from lower
cost of goods while exporting countries benefit from more employment, increase in wages and profits.
Theres also a larger market for goods to be sold to and also, technology, management skills can spread to LDCs and when
TNCs ad MNCs leave, impact will be smaller, ensure sustainability of the benefits too.
Costs:

With increase in imports, the domestic industries wil have to compete with imported goods, leading to structural umeployment
too. Dumping may also caused that. There is also threat of national security and terrorism. e.g. 911
A key benefit of international trade is different countries can produce goods and services more efficiently by exploiting their
comparative advantages. For countries with abundance of land resources and favourable climate like Thailand, they can
specialise in producing agricultural products like rice. For countries with abundance of labour like China, they can specialise in
manufactured goods as final product will be much cheaper due to relatively lower wage rate. By focusing on one's comparative
advantage, there is efficient allocation of resources and all countries will benefit from increase in total welfare and cheaper
goods and services.
With the advancement in transportation and communication technology, movement of goods and services across international
borders has become easier. This has helped greatly in international trade, with countries forming regional trading blocs and
signing FTA with one another
Global flows of goods and services have its pros and cons. However, i believe that it was necessary to allow the development
of nations to its current state.
Its advantages includes benefitting exporters and importers of this goods and services, by allowing them to develop economies
of scales in their operations and hence inducing productivity and innovation. It also allows for specialization and division of
labor to take place as well as the transfer of technology,skills and entrepreneurship which have led to the development of the
car manufacturing in Malaysia. For example proton. Hence, the average consumer faces more choices and quality of products
due to the openness of trade.
On a national level, it results in integration of the global economy and this serves as an impetus for higher levels of economic
growth and raises income. For example, in the past 10 years alone, Singapore's GDP has increased from 127.42 billion USD to
297.94 billion USD according to the World Bank Group.
However, this flow of goods and services does not come without a cost.
Firstly, the increased openness of trade results in increased dependency and systemic risk. One country's demands for imports
are another country's exports. A economic depression in one country has the effect of reducing demand in the origin country
and spreading to other countries due to this dependency. For example, the Great Depression started of in the US and impacted
other European nations. The deeper trading relations are, the more affected other countries will be.
There is also increased inequality. This is evident in China where the inequality between the richer regions that engage in trade
and the poorer nations have increased from 0.28 in 1983 to 0.73 in 2012.
Lastly, there has also been severe environmental degradation due to the race to the bottom. Pollution is exported to developing
countries which have more laxed environmental regulations than developed countries. This has resulted in smog in China
leading to health problems.
International trade refers to exchange of capital, goods, and services across international borders or territoriesa process
which
happens
more
easily
as
economic
globalisation
takes
place.
Benefits of international trade:

Through trade, countries can undertake specialisation to be more efficient in their production of goods and services.
For example, the more labour-abundant countries like the Philippines can specialise in labour intensive manufacturing
such as in textile industry, while the more capital-abundant Singapore can focus on capital intensive industries like
pharmaceutical industries and oil and refinery.
With specialisation, countries can then focus on improving the quality of goods they specialised in.

Free flow of goods and services, brought about for example by free trade agreements, allow producers to reap
economies of scale. As they can now target a bigger international market, they can produce more (increasing the
quantity produced) and therefore, lower the average cost of production.

International trade increases the availability of goods and services to consumers. Consumers are spoilt with more
choices of food, clothing, and other necessities which are produced by and imported from other countries. Overall, this
increases consumers welfare.

International trade creates job as production, distribution and consumption activities become larger in scale.
International trade allows for transfer of technology and knowledge/expertise when local companies venture overseas
or foreign companies open their business in our country. For example, Malaysias local Proton automobile company
was initially a joint venture between Proton and Mitsubishi (from Japan) back in 1983-1984. The joint venture led to the
production of the first Malaysian car Proton Saga in 1985.

International trade helps bring in Foreign Direct Investment (FDI) in the form of factories and machineries into the
local industry as the foreign company sets up production locally.

Costs of international trade:

Local / domestic market may become more vulnerable due to interdependency of economies. For example, when
the US was down with the global financial crisis, Singapore which depended on the US for trade was also heavily
affected.

Homogenisation of culture as foreign products enter domestic market. For example, Korean style and Japanese
style fashion that are popular among Asian teenagers.

Dumping refers to the export by a country or company of a product at a price that is lower in the foreign market than
the price charged in the domestic market. Dumping may occur and results in emerging/developing nations to lose out.
For example, local textile industry in the Philippines or the agricultural industries in Indonesia suffer when foreign
products, say from China and the U.S. enter their markets.

Environmental issues due to increased air freight, road traffic and depletion of non-renewable resources such as
fossil fuels.

Income disparity may widen as the more developed countries excel better in the international trade.

By specialising in goods where countries have a lower opportunity cost, there can be an increase in economic welfare for all
parties involved. Free trade allows countries to specialize in good where they have a comparative advantage. For instance,
some countries may be able to produce the same good more cheaply and efficiently than other coutnries, and therefore selling
it at a lower price; if a country cannot efficiently produce an item, they can thus obtain it from another country that can.
International trade enhances domestic competitiveness, takes advantage of international trade technology and allows a country
to gain a global market share. It also enables consumers to be exposed to goods and services not originally available in their
own countries.
Pros:
Diversification of products, goods and services.
Diversification of trade, imports from many different countries.
Generates economies of scale, which leads to higher profit margin and cheaper goods. This benefits both producers(lower cost
of production) and consumers(cheaper goods).
Cons:
International disturbances have a global impact. For instance in the case of 911 and SARS
Protectionism may occur. Higher volumes of cheap imports will lead to competition between domestic firms and industries, and
hence cause a loss of jobs as domestic industries cannot compete with the cheap costs of imported goods.
One benefit from international trade will be the increase in goods and services that is imported from other countries. Using
various economic theories of trade, countries will often choose to export goods that they have comparative advantage in. This
increases the scope of goods in the world market compared to the local one.
One cost of trade will be the gradual weakening of local small businesses as major players in the global market enter the
industry. It may harm the local business owners at the expense of economic growth.
International trade is beneficial when countries make use of each other's comparative advantage to produce more goods for a
lower opportunity cost. International specialisation based on labour, capital or resource advantages can increase the total
amount of goods and services consumed worldwide at lower prices, which is highly beneficial for consumers. It can also lead to
economic growth as the market size is not solely restricted to within the country, but to all over the world.
International trade also increases interaction between societies and individuals within societies, which can lead to the transfer
of technology, knowledge and expertise. This is especially important for developing countries which require the basic know-how
to kick start their economy. However, international trade can also be costly for the developing countries as they may lose their
domestic markets to larger MNCs which drive out local competition, resulting in developing countries becoming highly
dependent upon the developed countries.
Also, there may be environmental problems, such as global warming, caused by international trade due to the increased use of
transportation and non-renewable resources.
Benefits
1) Increased exports/ creation of trade

2) There is the increased availability and choice of good and service to consumers thus diversity.
3)Comparative advantage
Both 1 and 3 enables a country to consume things that cannot be produced within its borders as production cost high. Thus
cost savings. Another way to save cost is through economies of scale too where countries can buy in bulk to get materials and
goods at lower prices.
4) Comparative advantage anables specialization in goods that country produces with the lowest opportunity cost. Singapore
will produce capital intentive goods such as microchips but China on labor intensive goods such as textiles
Cost of trade
1) Unemployment, specifically structural unemploymeny. The import of technology and mechanics reduces the need for labour
as it is more efficient and productive hence those without the skills to manage such machines are sacked.
2)Another cost of trade is that since economies are increasingly interconnected, a disaster in a foreign economy may have
adverse implications on the local economy. For example, Singapore suffered in the tourism industry significantly due to 9/11 in
2001 in the US. Or in times of war there will be a serious danger of starvation if singapore dont stock up as we depend on other
countries for food and water.
3)Lastly, countries may also suffer due to exhausation of resources and importing harmful goods like drugs
Benefits of trade:
1) Trade creates employment in a country. This in turn provides jobs and a source of income for its people. For example, multinational corporations that set up offices in a country employ the locals and spill over effects that be felt in the form of increased
consumption as a result of earning income.
2) Trade increases knowledge within the economy. The influx of new technologies and services increases the overall
knowledge of the countries economy. Thus providing the country a new compeittive edge in that industry. For example, the
outsourcing of smart phone making to China provides competitor companies to study the handphone's design and thus attempt
to create a better one on their own, such as Xiaomi.
Costs of trade:
1) Decline of local businesses in the same industry. The scale of economies that large companies benefit from allow them to
sell their goods and services at lower prices, and thus local companies that are providing a similar good and service could lose
their businesses. One example in the presence of large supermarkets, which forces many mom-and-pop marts to shut down
because of the lack of a competitive edge.
2) While in the influx of companies could create new employment, it could also result in several people losing their jobs. This is
because new technology,, especially in the manufacturing industry, involve some form of atuomation. Thus the work that once
needed human hands for performing could now be done by machines, thus these workers, who are usually lowly skilled, find
themselves out of a job.
One benefit of international trade will be the increase in amount of goods available to consumers. As countries specialize in
their area of comparative advantages, consumers will benefit as they will now be able to consumer a wider basket of goods and
services, thereby increasing their overall utility. Moreover, international trade allow for consumers to purchase goods and
services that were initially unavailable due to difference in geographical endownment or lack of natural resource.
One negative side of interational trade is that as countries specializes and outsource certain part of their production cycle
oversea, there have been observation of a increasing pay difference between skilled and unskilled workers. This result in
unskilled workers being unable to enjoy the benefits of trade and might even face a drop in real income due to trade.
Trade allows for consumers greater variety in choices, often bringing in lower cost options from countries with an advantage in
producing the good/service as compared to their domestic market. Many international firms shifted their manufacturing
operations from their domestic market to China due to lower labour cost; despite more shipping costs incurred, which is more
than offset by the cheap labour available in the Chinese market.
However, this in turn may hurt the local economy as fall in demand for goods/services in the local market can lead to cutting
down of local production operations, usually by retrencment. If there are strucutral rigidities resulting in workers in sunset
industries being unable to transit into employment of the other industries, hence structural unemployment, which can become a
long-standing issue if nothing is done to help smoothen the transit, and help workers upgrade their skills.
One cannot deny the importance of international trade, especially for a small country like Singapore. International trade allows
Singapore to import much of its goods, including essential items like food and this helps to sustain the population. Going
beyond this, international trade also aids in the prosperity of a nation like Singapore as we are now able to import raw materials
and add value to these items through manufacturing process, and participate in international trade again by exporting these
products. Singapore has seen much success in this form of trade in the past decades, allowing the GDP per capita to flourish.

Monetary gains aside, international trade has its costs as well. High dependence on international trade puts a country
vulnerable to global economic downturns, something a country like Singapore has to take on due to the lack of natural
resources. This requires a very responsive economy that can restructure in terms of infrastructure and skills of the workforce,
something Singapore has managed to successfully cultivate over the decades.
The advantages of international trade includes international growth, market competition and exchange rate. International trade
opens market to people with more choices and alternatives which achieve growth not only nationally but internationally. It also
helps to increase market competitiveness through the observation of a range of trends in quality, product development, design
and packaging. Also, international trade affects exchnage rate as the currency used by different countries is different. For
example, as BCS asserts, if a business does most of its trade in US Dollars it may be beneficial for said business to trade with
Japan to spread the exchange rate risk between the Dollar and the Yen, therefore creating benefit for the company.
The disadvantage of international trade includesdifferent types of risks such as exchange rate risk, political risk, cultural risk
and credit risk. As much as exchange rate would benefit a country, there ought to be gains and losses, so some countries
would have risk in terms of exchange rates because trading in foregin currency may nopt be able to forecast finances
accordingly. International trade has political risk as investing in countries whose political regimes can change over time also
poses a few risks. Governments could discriminatorily change laws, regulations or contracts governing an investment. Cultural
differences could create problems for businesses wanting to trade overseas. This is because failure to take into account
different cultures might lead to damaging and costly mistakes. Lastly, it is very easy to overlook the risk of non-payment when
trading overseas too. Businesses should establish the credit rating of potential clients in many countries and guard against
non-payment through, for instance, letter of credit or arrange credit insurance. The risk comes with the impact of a customers
financial drawback of the firm and how to finance the offered credit period.
International trade is largely beneficial for the economy of the country with the production advantage and abundance in a
certain good. Therefore, when countries specialise in a type good and trade, there will be more efficient allocation of resources
and gain much more with trade than without trade. For example, China has an abundance of human resources, while USA has
an abundance of capital resources, therefore, when they trade, China will provide the workers to USA, while USA will provide
their capital. USA will gain from the lower cost of goods from China and China will have increased employment and knowledge
from the trade.
However, with the increased international trade, domestic firms will now have to compete with the increased foreign competing
firms exporting into the country. This will lead to unemployment in these sectors domestically.
International trade has many advantages and disadvantages. One key advantage is that it enables specialisation to take place,
and as such facilitates division of labour globally. As such, there is a greater diversity of goods and services, and at lower costs,
ultimately benefitting the consumers. International trade widens the extent of the market, and as such also generates
economies of scale. This translates to greater productivity and induces more innovations as well. International trade also
facilitates job creation and increases investments, especially foreign direct investments (FDI).
However, international trade does have negative impacts as well. Firstly, the domestic economy is exposed to increased
competition, and may struggle to stay afloat as they do not have the leverage of a large international market. Governments
may, in turn, offer heavy subsidies and other forms of support to help the domestic firms, but this may be interpreted as unfair
competition especially since government support is uneven globally. Economies are also more susceptible to external shocks,
such as the recent slump in oil prices that have affected oil-dependent economies adversely. International trade is also
jeopardised by the threat of counterfeit products circulating in the global economy as well.
All in all, the pros of international trade do outweigh the cons. Having said that, it is crucial that governments pay attention to
these cons and mitigate them as far as possible. Nevertheless, the benefits of international trade are geographically uneven;
some economies benefit a lot more than others. As such, it is pivotal that we consider these disparities in order to develop a
more nuanced understanding of international trade.
Benefits:
Increases the availability and variety of goods and services for consumers to choose from. Consumer welfare
increases.
Countries enjoy imports at lower prices and produce outside its production possibility curve. Combination of goods that were
previously desirable but unattainable for consumption, are now attainable due to international trade. Higher standard of
living for the people.
E.g. our electronics like television, hand phone, clothing, and food has a probability of being manufactured in another country.
The cocoa, tea and coffee we consume can be imported from countries like Ghana, India and Brazil respectively as these are
the some of the producer countries.
By having more variety, it also enhances domestic competitiveness as the goods from domestic firms have to compete with
imported goods. Domestic producers produce more efficiently by keeping costs low in order to remain competitive. This
implies more efficient production and better utilisation of the countrys resources.
Allow for specialisation due to uneven distribution of resources in the world. This will allow goods to be of better quality
and cheaper. It will also lead to increased production, economics of scale (EOS).
When a country specialise, she becomes more efficient and productivity increases. Increased productivity means the country

can now produce more goods and services but with the same amount of resources. Through trade, the demand for the
countrys goods and services will increase due to rise in demand for its exports. Firms can enjoy EOS as they increase in
capacity and size.
E.g. U.S has fertile soil, favourable climate and highly skilled agricultural workforce capable of producing enough corn for
domestic needs and for export to other countries. She has the comparative advantage and is the worlds leading producer of
corn.
The importing countries of corn from U.S can benefit from the lower cost of goods as compared to if they were to produce it
themselves while the exporting country which is U.S in this case can benefit from more employment, increase in wages, and
profits.
Engine for economic growth and employment.
This is especially for small and open economies like Singapore where the small market is a constraint on our economic growth.
With trade, we are able to export to the rest of the world. This will mean that there will be external demand, increase in export
revenue and national income. Employment and SOL improves as more jobs are created.
E.g. Canada
Exports are very important to them as it creates one out of three Canadian jobs. 40 percent of what Canadians produce is
exported.

Costs:
Competition from firms abroad can cause demand for a product or service to fall and some industries. Employees can find
themselves out of work if the competition from abroad means the firm they are working for has to cut back or even close down.
As the competitive conditions between countries changes, some firms or industries find they can no longer compete and may
be forced out of business. This can lead to structural changes and unemployment in the economy.
E.g. As the textile imports in the US grew, many people lost their jobs. While textiles production went down, other industries
such as healthcare picked up and people had to pick up new skills through training for the rising industries.
Benefits:
1. Diversification of goods and services (eg. Singaporeans can enjoy coffee and cocoa from Brazil)
2. Creates peace due to mutual interdependence through trade (eg. Ukraine and Russia)
3. Foreign Direct Investments (FDIs) creates job opportunities and resource transfer
4. Greater efficiency - specialization can take place, with countries producing according to their own comparative advantage
(eg. Singapore specializes in electrical, semi-conductors which are capital intensive while Indonesia specializes in labour
intensive goods such as textiles)
Costs:
1. Domestic industries may suffer if they are unable to compete with imports and competition from foreign industries (eg.
dumping of shrimp in US market by Thailand and China adversly affects local shrimp industry in US)
2. Negative environmental impacts as foreign firms may not comply with local regulations stringently
3. Exploitation of low-wage workers (eg. clothing industry in India)
4. Structural unemployment - technology replaces the need for workers (eg. sewing machines reduces the demand for
seamstresses)
International trade allows for the exchange of goods, services, and capital between countries and regions. When this happens,
there will be specialisation of labour to generate economies of scale, increasing productivity and wasting fewer
resources, Economic benefits include increase in the GDP and the creation of jobs, which drives growth for nations.
International trade can also allow for existing products to gain a global market share and reduce the dependence on existing
markets.
Besides economic benefits, international trade allows for the excha. nge of cultures and values across the world. With better
cultural understanding and with countries becoming more interdependent, countries may strive to develop better relations or
maintain existing ones so that trade and their economies will not be affected.
One downside is that domestic industries will have to compete with imported goods that may be produced at a lower cost and
hence are priced more competitied into the US, many people lost their jobs. They then had to be retrained for other jobs which
prcked up as the US focused on developing other industries.
Besides, there is an increasing income gap between the developed and developing world. Countries are very susceptible to
events that happen elsewhere in the world, and a recession can imoact the global economy. There might also be exploitation of
cheap labour as seen from the workers who work for a measly salary in China and Bangladesh. Many work in poor amd
overcrowded conditions, and this was seen in the episode where a building housing textile workers collapsed in Bangladesh
and killed many of the workers inside.