There is no way of
demonstrating the
advantages of international trade other than focusing attention on the financial, economic and industrial interdependence and interrelationship of the two universally acknowledged categories of countries — that is, the developed countries and the developing countries. Examples of the former are Western Germany, France, Great Britain and U.S.A. While the examples of the latter are Asian, African and Latin American countries such as India and Pakistan, Nigeria and Ghana, Brasil and Mexico respectively. Therefore for a detailed examination, let us first of all consider the advantages to the developing countries, Nigeria for instance:
The Advantages of International Trade to the Developing Countries
1) As a Ready Market for Natural Resources: Most of the natural resources of the developing countries depend on foreign trade as a major source for raising revenue for their producer countries.
2) Supplementing Home Food Consumption: To feed their peoples most developing countries depend to some extent on importation of foods from overseas market. For instance Nigeria depended on importation of millions of Naira worth of rice to feed her people each year since the 1970s up till 1983 and there are tendencies that this practice might continue for some time.
3) Sources of Manufactured Goods: Massive and regular importation of necessaries of life such as clothing materials to luxury goods such as motor cars is an evidence of the dependence of most developing countries on foreign trade for their existence as well as their living.
4) Supply of Raw Materials and Spare Parts: Most industries of the developing countries depend to a k extent on overseas countries for the supply of their raw materials and part-finished goods. For instance, Leyland Motors (Nigeria) Ltd. (manufacturer of motor vehicles) Sanyo (Nigeria) Ltd. (manufacturer of electronics) and Volkswagen (Nigeria) Ltd. are examples of leading industries in Nigeria that depend almost wholly on imported raw materials and spate parts for their operations.
5) Centres of Commerce: Most populous developing countries have become in modern times centres of commercial and industrial activities due to international trade. For instance, Nigeria as much as Brazil has become the focus of industrial locations and commercial engagements for multi-national companies for reasons of share population and market potentials.
6) International Political influence: For instance Nigeria, in recent times and since her oil boom, has been prominent in international politics. The oil boom itself owes so much to international trade. Nigeria has been able to forge a foreign policy that makes her the spokesman of Africa on burning issues such as South Africa’s apartheid, the liberation movements in South’s Africa etc. In international comity of nations like the U.N.O. (United Nations Organizations) and O.A.U. (Organization of African Unity) the name “Nigeria” has become well known.
7) Development of Regional Economic and Political Cooperation:
The irony of the negative effects of international trade is that it has led to positive thinking and efforts on some parcels of the developing world to move towards economic and political cooperations. The ECOWAS are together in order, among other things, to liberalise use among members states the practice and procedures of foreign trade The Latin American states have their economic grouping both for economic and political advantage. The O.A.U. in her Lagos economic deliberations of 1981 agreed to go into regional economic blocks for economic and financial developments of Africa as a continent.
The Advantages of International Trade to the Developed Countries
1) Constant Sources of Food Importation: Without foreign trade most developed countries would be unable to feed her peoples. Britain relied to a large extent on imported food to feed her over 55 million population. Most of the favourite dishes of the British breakfast tables (like dairy products, and cereals) are not products of British farmers but imported food items from developing countries.
2) Supply of industrial Raw Materials: A lot of industries of the developed countries are fed with raw materials from the developing countries. Examples of such raw materials are West African cocoa, cotton, gold, diamond and crude petroleum.
3) Revenue Earning as Service Centres: Most of the developed countries own their revenues as service centres to international trade. For instance London is renowned since ages as the world capital for finances and shipping. For years, it has served in addition as an entrepot for most goods meant for European countries like France, Western Germany etc.
4) As Savings Centres: Most capitals of Western Europe, for instance, have become deposits or savings banks for most nationals and governments of developing Countries. The need to own ready foreign currencies in pursuance of foreign trade has urged some commonwealth countries, Nigeria, Kenya, Zambia etc. to keep some substantial part of their foreign reserves in (£)sterling in London or ($) U.S.A. dollars in New York. Switzerland has served as a safe haven for those who want to have overseas savings accounts. The result is that London, New York, and Zurich among others, have been found to have more than their own shares of the world foreign exchange reserves; and they have earned big “dividends” from serving as financial capitals of the international trade.General Advantages of International Trade
1) Benefits of Specialization: it encourages one country to specialize and thereby utilise and benefit fully from her gifted natural resources.
2) International Competition: It fosters competitive spirits on international scale among nations and thereby discourages localized monopolies. Even when producers of the same products might form organizations like the OPEC, (Organization of Petroleum Exporting Countries) for the maintenance of one ruling price in the world market, among other things, they still have to compete in many other ways like quality, transport and prompt delivery services.
The Disadvantages of International Trade Inspite of the overwhelming advantages of foreign trade there are some inherent disadvantages. In conclusion it must be remembered that some countries might benefit from the considerable ad-vantages of the international trade while some other countries might suffer as a result. The blessings of one country are the cures or misfortunes of another country.
1) Dangers of Over-specialization: The princip1es of international trade encourage international specialization among nations, but this is equally fraught with dangers. Nigeria for example depends for over 95% of her national revenues from the production and sales of her petroleum oil. Therefore a fall-off in demand for this oil, might create some national financial upset, if not crisis, as in 1981/82 when the petroleum oil glut led to austerity measure by almost all the governments of Nigeria (Federal and States). Ghana has been experiencing a near national economic bankruptcy due to a depression for a long time now, in the prices of her gold and cocoa, her two leading products. Therefore, “excessive dependence on an export product could spell national economic embarrassment, if not doom.
2) Isolated Depression for an Export Industry: An industry that depends mainly on foreign consumption might be experiencing an isolated depression while the whole of foreign trade benefits. For instance a fall in demand and therefore a fall in price would spell depression in the home oil industry while oil consuming foreign, countries and industries might benefit significantly.
3) Dumping Grounds: The practice of international trade allows the use of certain home markets as “dumping grounds” for the surplus products of some overseas industries; identifical home industries suffer excessively as a result.
4) Widening the Gap of Wealth between Nations: Through international trade the gifted natural resources of individual countries are turned into great wealth. Such national wealth makes one country richer than the other and thereby aggravates the economic differentials between nations.
5) Restrictive Trade Measures: It is an irony that the effects of international trade lead to measures that limit the gains of international trade. For instance a country that incure an adverse balance of trade and or payment would eventually put up measures that might result in restricting the full power of international trade. Such measures are discussed at the end of this chapter.