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This is the trade carried across different countries. Some of the factors that have greatly improved this trade include; improved transportation, outsourcing and Multinational Corporations. Expanding international trade is due to continued globalization. International trade has enabled nations to access goods being produced in other regions. The principles used in international trade are similar to those used in domestic trade. The only existing difference is the change in cost since international trade is very costly and this because of the tariffs imposed at the borders, border delays as well as the cultural and legal system differences. Mainly International trade is restricted to trading in services and a goods, only to a small extend is capital and labor trade accepted. For these reason the trade in services and goods then substitute the production factors (Whale 7).
Countries are opting to buying goods from other countries in order to make the maximum usage of the production. For example the United States imports labor intensive goods from China which it will not have accessed if there was no international trade. Ricardian model is used in international trade since it bases on comparative advantage. This theory allows countries to focus on producing there best produce. The prediction of this theory is specialized production rather than production of a wide variety of goods. One of the great achievements of this theory is the assumption of the technology differences between the involved countries. This theory specializes in short run international technology differences thus supporting the fact that countries should specialize in comparative advantage which brings out specialization.
During the old times bilateral treaties were used to regulate trade between two countries. For this reason because of the mercantilism belief there were many restrictions and high tariffs to the trade which was done across nations. This belief has found its way to the western nations. From the end of the Second World War, trade organizations have been working towards promoting free trade as well as creating trade structures which will be regulated globally. Because of this the developing countries have not greatly benefitted from international trade. Strong supporters of free trade are the economically powerful countries though they selectively protect strategically useful industries. One of the countries which have greatly improved in international trade is India (Venus, Lai and Cheng 9).
Through examination of world output and trade, trade patterns are achieved. These patterns play a big role in prediction of the future growth patterns. One of the main challenge is the people involved in the trade are not defined in terms of high and low income nations. At times some important information gets to the public and that is why people are able to know the main beneficiaries of the world trade. World output affects trade output in a supply demand relationship. Therefore when the output is low consequently the trade output will diminish. This mostly happens during catastrophes or global economic recession. Low production leads to reduced purchase since clients fail to get enough products that they need. Recession weakens the currency of a country and a result imports became very expensive since the value of the currency depreciates (Youngson 19).
The total amount of the world produce is what is referred to as the world output. Through trade a country is able to specialize in one form of output. For example a country that is good in production of tea will forgo maize production in order to produce sufficient tea that can be traded in the world market. In this case in absence of international trade some countries will not be able to access some products. For example the US imports coffee from Africa through the world trade therefore if international trade ceases then it means that the states will no longer access coffee. Therefore if international trade had to be done away with then the United States will be forced to do without labor intensive goods that they usually obtain from China.