Problems of international trade

Globalization has resulted in improving communication and trade relationships amongst nations. However, trade relationships are strictly guided by international laws and treaties. In other words, when two countries decide to enter into trade relationships, they must draw up a treaty that safeguards the rights of both nations. Additionally, the treaty should not contradict any pre-existing international trade law. Hence, international trade is highly complex and has to be done in ensuring that the rights of a participant or non-participant nations are not infringed upon. Say, for instance, the trade relationship between two nations is found to be harmful to the economy of a third country, which is not a part of the treaty. Then in such a scenario, the treaty must be revisited, and specific changes must be brought about so that the rights of the third party, which is not a part of the treaty, is not be impugned upon. This is especially true in the case of a weapons deal. Often countries have to sign treaties where they promise not to use the superior weapons that they have purchased from developed nations in border scrimmages. Many such deals and details have to be worked out to ensure that international trade can be carried out without the rights of the countries being put to dispute. Some of the other common problems of international trade are as follows:

Developmental issues of individual nations

Countries that are considered to be developing economies are found to have agro-based economies. This means these countries usually export agricultural products and raw materials in exchange for finished goods. The prices of finished products are always higher than natural materials. However, the rights of both nations must be protected. Hence, the cost of the products should be fixed at such rates that neither country feels that its rights have been sidestepped. When it comes to international trade, usually developed countries have the upper hand because these countries provide the finished products, and raw materials can be sourced from various developing nations.

Additionally, the numbers of developed countries globally are a handful, and hence, it becomes essential to toe the line drawn up by their diplomats. However, sometimes developed nations have to accept the trade laws and treaties drawn up by developing nations if they are trading in resources that are rare and are found only in a few countries. Thus, one of the most significant drawbacks of international trade is drawing up treaties that are beneficial for both nations, the one exporting the product and the one importing it. Economists often mention that the best trade treaties are those that have been drawn up between countries that are economically at par. In such treaties, the rights of both nations are equally represented.

Prevents a nation from achieving self sufficiency

For developing nations, it is essential to become self-sufficient and self reliant. To do so, the country must build manufacturing units that assemble and produces capital goods and machinery. Usually, these are the equipment that requires maximum investment. However, if a nation depends on foreign investment concerning the manufacturing of capital goods, it will never achieve self reliance. Hence, as a part of the trade deal, there should be restrictions on the import of capital goods.

Additionally, the governments of developing nations should make efforts to manufacture the capital goods, so that these nations do not have to import finished products from developed countries. It has often been seen that international trade and easy availability of finished goods, even at a higher price, prevents developing nations from becoming self-reliant. This is also considered one of the major problems of international trade. For a developing country to become developed, its manufacturing units should be modernized and should be capable of producing capital goods like machinery, tools, and heavy engineering equipment. Thus, the complete growth of national participation in international trade also should be done after careful evaluation of trade laws and treaties.

Evaluating foreign investment

Most developed nations invest in developing economies due to the availability of a labor force at a low cost. However, the labor force itself must be trained to achieve the skill to manufacture the right quality products that meet the expectations of consumers of the developed nations. Similarly, a skilled labor force is often acquired companies in developed countries from developing nations, because it is cheaper. However, when labor outsourcing is done, it has to be completed adhering to international laws. The movement of the labor force across international borders is essential for the growth of all nations. However, it should not occur at the cost of the economic development of a weaker nation. Sometimes the loss of skilled labor force can prove to be a significant financial loss for a country because the labor force is an asset. Hence, the protection of an asset and outsourcing of labor force as an asset is also matters importance for a nation. When it comes to international trade, labor laws tend to be different from those that safeguard the movement of capital and consumer goods. This is a significant issue of international trade that needs to be addressed, especially with the outsourcing of IT services becoming a major economic factor in the present day globalization. IT outsourcing should become an essential part of international trade laws, and it should be done ensuring the rights of both parties are carefully safeguarded.

International trade is important and, at the same time, one that should be done with diplomacy and tact. The policies must be charted in such manner that the countries participating in the trade benefit economically from the policies. Additionally, it should also strengthen the diplomatic relationship between the two nations. With globalization, it is impossible to live in a world where there is no international trade. Moreover, international trade can prove to be beneficial to both the developing and the developed nations. The only thing that the countries should take care of is that the rights of the participating nations are preserved.

Reference URL

http://www.economicsdiscussion.net/international-trade/problems-international-trade/7-main-problems-of-international-business/13949

http://www.cosmopolitalians.eu/different-challenges-international-trade/