Running Head: MACRO-ECONOMICS 1

Macro-Economics

Name

Professor

Institution
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Macro-Economics

Advantages:
Increased revenue
Increased revenue is a direct benefit of international trade in the sense that the consumer

base is expanded on a global scale. Goods and services can thus be produced in one country and

ferried to other countries for sale. An increase in the sales imply increase in the profits of the

organizations as a whole. Surplus goods produced by the country are thus profitably disposed.

Maneschi (2014) suggests that trading internationally is further beneficial when payments are

made in international currencies since the entity’s benefit from foreign exchange. An example is

in the US. When the dollar value goes down the manufacturers are able to export more as

demand abroad conversely increases. Increased revenue has a trickle-down effect on the

economy as more persons will be employed in different sectors.

Increased revenue advantages of globalization are closely associated with large scale

production for larger world-wide markets. Interviewed CEOs reported net increase in operations

and employees by up to 46 percent as stated by Feenstra (2016). Increased revenue lads to

having a competitive advantage over competitors due to international trade.

Opportunity to specialize

International trade provides a chance for companies to specialize in specific lines of

products in order to capture specific niche in any market. For example, if a country exported

flowers, it can henceforth specialize in roses depending on the prevailing market demand.

Feenstra (2016) further suggests that producing goods for international standards is advantageous

to companies as it ensures they improve on quality. Goods for export in most countries go
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through rigorous quality checks pertaining to standard compliance. In this way the entities

benefit by developing their production technology to meet international standards.

Specialization is a benefit of selling internationally due to economies of scale attributed

to bulk production. In order to produce for international markets, specific raw materials will be

purchased both locally and internationally as suggested by Maneschi (2014). Countries thus

become encouraged to produce different goods employing division of labor.

Disadvantages:

Political risk

International trade makes a country dependent on others in terms of imports thus making

the latter vulnerable to manipulation, blackmail and coercion. Since international trade thrives in

good peaceful political environments, political instability in either a sourcing country or where

the goods are to be delivered may greatly affect the international trade. For products that are

patterned becomes difficult to prevent illegal reproduction unless the country’s involved are

allies and a signatory to patent protection treaties. Tanzi, (2015) highlights terror prone gulfs are

political issues affecting international trade. An example is the gulf of Somalia that is common to

the al-Shabaab terror group.

Countries use international trade to impose economic dependance on less privileged

countries. In order to achieve political milage in these countries, the powerful nations impose

sanctions on the less developed countries thus the international trade becomes pitfall. Abstract

changing of laws also greatly affect a countries production as well as supply chains thereby

hindering economic independence. Unfortunately, international trade provides avenues for

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countries for dumping products whose useful life is elapsed according to (Johnson & Ritchie,

2015).

Shipping and custom costs

High shipping and custom costs are the main undoing of international trades. Countries

impose high taxation on specific goods coming into their country in order to protect their local

markets. At the same time, revenues and custom charges are often inflated to restrict certain

products from coming into a particular country as illustrated by Johnson & Ritchie (2015). For

example, a country that manufacture’s a specific car brand will impose higher taxes on other car

brands in order to encourage local consumption.

Finally, Tanzi (2015) shows that consumers may further be charged additional shipping

charges such as landing costs. This costs and process have an effect of deterring consumers from

doing international purchases. In case the product fails to meet the needs and specifications of

the client, returning the good is immensely difficult. For this reason, most people will prefer

sourcing locally. Some clients navigate the problem by waiting for services of large ships like

ones owned by Maersk logistics companies.

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References
Feenstra, R. (2016). Advanced international trade (p. 25). Princeton University Press.

Johnson, J., & Ritchie, G. (2015). International Trade Law (p. 168). Irwin Law.

Maneschi, A. (2014). Comparative advantage in international trade (p. 33). UK.

Tanzi, V. (2015). Public finance, trade, and development = (p. 88). Wayne State University

Press.