The era of globalization can also be said to be synonymous with free trade or international trade. Unlike national trade, trade in this international concept certainly has a broader and more complex scope.
The increasingly widespread international trade is also driven by world conditions that seem to be getting smaller from day to day. This can happen because of the faster and easier transportation and communication. As a result, international markets are increasingly wide open so that the process of buying and selling goods, services and financial assets is even easier between economic subjects of other countries.
When referring to the realm of history, international trade is basically not new. Because, even in ancient times, international trade was often carried out and also an important aspect in the economy.
International trade in ancient times was mainly carried out by the people of Egypt, Greece, Rome, Phunesia, which was then followed by the nations of Spain, Portugal, the Netherlands and Britain.
Definition of International Trade
Understanding international trade can be interpreted as a form of trade transactions carried out between the subjects of one country’s economy with the subjects of another country’s economy, both regarding goods or services.
The economic subject referred to in this matter may be in the form of a population consisting of ordinary citizens, export companies, import companies, industrial companies, state companies or government departments.
Inhibiting factors of international trade
Basically, international trade is not easy to do. There are so many obstacles to international trade. According to Amir MS, international trade is considered more complicated and complex when compared to domestic trade.
There are several factors causing the complexity of the implementation of international trade, including:
- There are state boundaries that separate buyers and sellers
- There are various kinds of regulations such as customs, which are sourced from restrictions issued by each government.
- There are differences in languages, currencies, estimates and scales, laws in trade and so on in each country.
Benefits of international trade
Although complicated and complex, international trade remains the choice of many economic subjects. This is because international trade also offers attractive benefits and advantages, when compared to domestic trade.
The benefits of international trade according to Sadono Sukirno, namely:
1) Obtaining goods that cannot be produced in their own country
The differences in geographical conditions, climate, the level of mastery of science and technology and other things, can affect differences in the results of a country’s production with other countries. International trade is able to assist countries in meeting needs that are not produced by themselves.
2) Get the benefits of specialization
By specializing in international production and trade, each country can benefit from:
- Each country’s production factors can be used more efficiently.
- Each country can enjoy more goods than can be produced domestically.
3) Expanding the market and adding profits
International trade provides opportunities for entrepreneurs to be able to run their production machines to the full, and sell the excess products abroad.
4) Transfer of modern technology
With foreign trade, a country can learn more efficient production techniques and more modern management methods through technology transfer.
Drivers of International Trade
The players of domestic trade, especially those who have large capital, do feel that they have benefited a lot through international trade. With the production factors and production efficiency developed, the surplus goods produced can be sold abroad.
While goods that are not produced domestically, can also be purchased from other countries. This is also what is considered a benefit for consumers. This concept is also the driving force for the increasingly widespread international trade.
In international trade, there is an absolute advantage , comparative advantage , and competitive advantage . These three things are considered to be able to encourage the development of international trade which benefits all parties.
In addition, there are many factors driving international trade, including:
- Differences in Natural factors or Natural Potential of each country
- Efforts to meet the needs of domestic goods and services, which cannot or are difficult to fulfill from within the country.
- There is a difference in the ability in mastering science and technology to process economic resources
- There is a desire to gain profits and increase state revenue
- The existence of excess products in the country that requires new markets to sell these products.
- There are differences in geographical conditions, such as natural resources, climate, labor, culture, and population and so on, causing differences in production results and the existence of production limitations.
- There is a common taste in an item.
- There is a desire to open cooperation, political relations and support from other countries.
- The era of globalization that causes interdependence, so that not a single country in the world can live alone.