Essay Example: International Trade


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International Trade

International trade has transformed the global economy. It has contributed positively to the increase in employment opportunities in many countries and increased the variety of goods available in different countries. However, international trade has contributed to the rise in income inequality and increase overdependence on foreign firms. These demerits have made some people develop a mechanism of minimizing the negative impact of globalization.

International trade encourages specialization, and this leads to an increase in the level of production.  The increasing output spurs economic growth and helps in the creation of employment opportunities (Amadeo). The availability of employment opportunities decrease dependency ration and increase household income. Besides, globalization enables different firms to offer their products to consumers in different countries. This increases the variety of goods and competition. In the long run, consumers benefit because the competing firms increase the quality of products and reduce prices (Mankiw).

International trade has led to an increase in income inequalities. The ability of firms to shift firms to countries with abduct labor decreases the bargaining power of unions. The situation has led to a slow increase in wages in developed countries (Mankiw). At the same time, wealthy shareholders earn high returns. Finally, international trade encourages specialization, and this encourages countries to depend on foreign firms to provide some of the essential products and services. The dependency on foreign firms increases the risk of a decrease in supply during the period of political differences (Ayres).

International trade increases productivity and creation of jobs. It also increases a variety of commodities available to consumers. However, it encourages over-dependency on foreign firms and increases income inequalities. The various merits indicate that international trade should be encouraged, but countries should put in place a mechanism of minimizing the negative implications.

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