International Trade: Forms, Benefits, and Reasons for Its Application
International trade activities can be carried out directly between countries, or between entrepreneurs within the country.
International trade has many benefits and one of the most important is to meet the needs of goods or services in a country.
As we all know that there are some countries that lack or even do not have produce, so the country has to buy raw materials from foreign countries.
To be able to better understand international trade thoroughly, here is the full explanation:
Forms and Types of International Trade
1. By form
International trade is divided into 3, namely:
- Bilateral Trade
- Regional Trade, is a trade involving countries in one region for example ASEAN
- Multilateral Trade, is a trade involving countries without territorial restrictions
2. By type
International trade is divided into 4, including:
- Export and Import: this activity is the most frequently carried out by almost all countries.
- Barter: Bartering is a buying and selling activity carried out by exchanging goods. Before there was money, all buying and selling activities used a barter system, and currently the barter system is still valid for international trade, such as direct barter, counter purchase, or bay back barter
- Consignment: The activity of sending goods abroad for sale without any special buyers abroad, in other words, the goods are shipped first and then sold directly at their destination. Such a system is very profitable for the seller in the destination country, because he only needs to pay for the goods sold to the supplier in the country of origin.
- Border Crossing: International trade activities that occur in 2 neighboring countries. The purpose of this activity is to make it easier for people in both countries to carry out buying and selling transactions.
Causes of International Trade
All activities are carried out for reasons, as well as these trading activities. The causes of international trade are, as follows:
- Meeting Needs
It should be noted that each country has advantages and limitations in providing needs for the community, both in terms of natural resources and technology. Therefore, these international trade activities are carried out to meet the needs of society.
- Foreign Exchange Needs
A country needs foreign exchange to build a country and this interstate trade activity is one of the activities that can bring foreign exchange to the country.
- Comparative Advantage
As discussed earlier, a country must have an advantage when compared to other countries, therefore it is an opportunity for the country to increase state revenue through trade activities between countries.
Benefits of International Trade
In addition to meeting the needs of the people of a country, international trade also has various other benefits, such as:
- Improvement of State Welfare
Export and import activities between countries are actually able to improve the welfare of the country, this is certainly related to the smooth running of the economic cycle and also the foreign exchange earned.
- Strengthening Relations Between Countries
Activities between countries can become closer with bilateral trade. Indirectly, when a country exports objects or services needed by another country, it has actually helped to meet the needs of that other country.
- Expanding Employment
Without realizing it, the more foreign trade activities in a country, the more jobs available to its people. This certainly brings good benefits and is also able to reduce the number of unemployed in the country.
- Life needs are easy to meet
It should be understood that all the goods or services we need do not always come from Indonesia, for example, smartphones.
It is undeniable that the majority of smartphones circulating in one are smartphones imported from other countries.
This proves that the activity of importing goods to a country is an activity that can make it easier for us to meet the needs of life, not only regarding technology but also basic needs such as beef and so on.
Driving Factors
The following are the driving factors for international trade activities, including:
- Market Expansion
The main factor in the existence of international trade is for market expansion. Expanding the market in business means increasing the number of profits and of course this is very good.
In addition, by expanding the market, the business will also be better known, not only by the domestic community but also the international community.
- Technology Utilization
When compared to a few years ago, trade between countries is now becoming easier and this cannot be separated from the development of existing technology.
In fact, currently customers can buy goods from abroad only through applications or websites and then the goods will reach the customer's home.
This is a form of utilizing technology that is able to support trade activities between countries.
- Economic Freedom
Another supporting factor that cannot be forgotten is the factor of economic freedom. Although each country has its own regulations related to trade activities abroad, with the economic freedom factor, all buying and selling activities between countries become easier to carry out.
Positive impact of international trade
- National Economic Stability
- Encourage a country's technological growth
- Increase foreign exchange
- Expanding employment opportunities
- Improving the quality of people's lives
- Strengthen cooperation relations between countries
Negative impact of international trade
- The price of domestically produced goods decreased due to the large number of imported goods
- Become dependent on other countries
- The country's economic threat becomes lower if it is unable to compete in the free market.
That is a complete explanation of international trade, if it is concluded that this trade activity is an activity that brings many benefits to a country.
However, the state must also compensate for it with the domestic production of goods or services so that the country does not fully depend on other countries.
Therefore, the growth of domestic industry must be continuously improved to keep pace with export activities carried out by a country.
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