Give the benefits of international trade.
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The main benefits of international or foreign trade are:
- International trade encourages specialisation on the basis of comparative advantage. This enables a country to obtain foreign goods at a cheaper rate in context of the domestic resources used.
- An increase in export trade widens the country's total market. Production of more goods will further lower the cost of production, leading to lower cost per unit.
- It widens the scope of industrialisation.
- It encourages competition, leads to innovation and increases capital flows.
- International trade acts as an 'engine of growth'. It transmits growth from one part of the world to another. So, the demand in Britain for raw material brought prosperity to Australia, Canada, New Zealand, etc.
- It helps the country to earn valuable foreign exchange.
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