Benefits and Drawbacks of International Trading

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Recommended: Concepts of international trade

Trading is not concept that is new. Trading can be seen from all aspects of life throughout time. Whether it is a child in a elementary school, trading a bag chips for a cupcake, or it is back two thousand years and Native Americans trading with pilgrims. The concept of international trade is not new either, but the concept of international trade has as many benefits as it has drawbacks.
One of the many advantages of trading internationally is having foreign direct investment (Investopedia, Foreign Direct Investment). “Foreign direct investment, which is the amount of money that individuals invest into foreign companies and other assets(Investopedia, Foreign Direct Investment).” When there is foreign direct investments economies have a chance to grow and compete with other economies. When a country is being stimulated by foreign direct investments a country can experience an increase in employment, and because of an increase of the employment level the gross domestic product will also grow (Investopedia, Foreign Direct Investment). Foreign direct investments can also help stabilize unstable markets(OECD iLibrary). Foreign direct investment can also be important to help foreign markets develop(OECD iLibrary). Foreign direct investments can happen in a number of ways. The domestic market might buy shares in a foreign company, or they might have a merger with the foreign company(Investopedia, Foreign Direct Investment ).
One of the more important aspects of international trade is the creation of the free market(Benefits of Free Trade, Froning). A free trade market can be defined as, “ a group of countries that invoke little or no price control in the form of tariffs or quotas between each other( Investopedia, Fre...

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...s usually measured in the long term, and this is because of the impacts happen overtime(Investigating Answers). Political risk can occur for multiple reasons and these include currency valuation, wage levels, and labor laws (Investigating Answers). However, there are also events that can cause political risk, such as war, or civil uprisings. Events like these can cause political risk that make it difficult to trade internationally(Investigating Answers). Political risk can diminish returns for investments while trading internationally, but some of these lost can be covered by some forums of insurance(Political Risk).
Even though there are some disadvantages to international trade. It seems as if the benefits outweighs the disadvantages. Due to the advantages that are created from international trade there will always be international trade in free economies.

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