If you walk into a supermarket and are able to buy South American
bananas, Brazilian coffee and a bottle of South African wine, you are
experiencing the effects of international trade.
International
trade allows us to expand our markets for both goods and services
that otherwise may not have been available to us. It is the reason
why you can pick between a Japanese, German or American car. As a
result of international trade, the market contains greater
competition and therefore more competitive prices, which brings a
cheaper product home to the consumer.
What Is
International Trade?
International trade is the exchange of goods and services between
countries. This type of trade gives rise to a world economy, in which
prices, or supply and demand, affect and are affected by global
events. Political change in Asia, for example, could result in an
increase in the cost of labor, thereby increasing the manufacturing
costs for an American sneaker company based in Malaysia, which would
then result in an increase in the price that you have to pay to buy
the tennis shoes at your local mall. A decrease in the cost of labor,
on the other hand, would result in you having to pay less for your
new shoes.
Trading globally gives consumers and countries the opportunity to be
exposed to goods and services not available in their own countries.
Almost every kind of product can be found on the international
market: food, clothes, spare parts, oil, jewelry, wine, stocks,
currencies and water. Services are also traded: tourism, banking,
consulting and transportation. A product that is sold to the global
market is an export, and a product that is bought from the global
market is an import. Imports and exports are accounted for in a
country's current account in the balance of payments.
(Adapted from:
http://www.investopedia.com)
