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International Trade and Policies

International trade refers to exchange of goods, services, and capital across international borders or territories. The social, political, and economic importance of international trade has risen significantly in recent years. On the other hand, international trade policies dictate the terms and conditions that countries must adhere to before becoming fully integrated into the global economy. Globalization, technological advancements, industrialization, outsourcing, and multinational corporations impact the system of international trade. Through global trade and policies, countries can produce and export goods as well as services to other nations with minimal restrictions. International trade and policies improve and facilitate international relations, trading, technology sharing, consumption and real income of countries involved.

Countries involved in international trade and policy agreements must embrace free trade. Free trade implies absence of quotas, tariffs, and other governmental barriers. It improves economic welfare of nations involved in international trade. Furthermore, free trade allows each nation to specialize to produce specific commodities it can manufacture efficiently and cheaply compared to other countries. Unilateral free trade, for instance, allows countries to reap the benefits as well as returns of free trade right away. Therefore, countries should undertake unilateral reforms to avoid or mutually reduce domestic barriers to international trade.

International trade policies comprise bilateral and multinational arrangements between nations. These policies dictate the terms of trade between nations in the global markets. International trade policies are particularly of utmost concern to Less Developed Countries (LDCs) because they determine the terms on which such countries will participate in the global market. Free trade policies, for instance, eliminate barriers to commodities produced and traded by the parties, thus opening up markets. A multinational trade agreement is arguably the best outcome of various trade negotiations involving major trading nations or territories.

The General Agreement on Tariffs and Trade (GATT) is a vital multinational trade arrangement worldwide. GATT was set up in 1947 by major countries such as the United States in the wake of the global wave of protectionism. GATT significantly reduced tariff barriers among industrial countries particularly on manufactured goods.

International trade and their consequential policies improve and facilitate international relations, trading, technology sharing, consumption and real income of countries involved. International trade represents a considerable share of GDP in most states as well as countries globally. The behavior and motivation of countries or corporations involved in international trade do not change significantly compared to domestic trade. Nevertheless, international trade is arguably more costly relative to domestic trade due to the policies reinforced.

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