Australiaâ€™s international trade

Reasons for international trade

There are several reasons why countries prefer to engage in international trade. They are as follows.

â€¢ To gain economic advantage
â€¢ Have new sources of revenue
â€¢ Increase on productivity
â€¢ Benefit from increased growth opportunities
â€¢ Benefit from diverse innovations
â€¢ Reduce domestic dependence on domestic markets and resources

By trading internationally, a country like Australia can address the economic problem of scarcity. This means that Australia can access more resources outside the country for her benefit. On the other hand, it can efficiently allocate its resources in a manner that satisfies her needs.
Similarly, international trade brings in more opportunities for Australian business people and workers and therefore, they benefit from improved living standards and profits.

Indeed, economies of scale is derived from international trade. I this case, a country saves from unsustainable cost of production and therefore, can import or do international trade at a reduced cost.

Arguments for and against free trade and protectionism

Arguments for free trade are:

â€¢ There is increased economic growth
â€¢ Increased foreign direct investment
â€¢ Business-friendly environment
â€¢ Encourages innovation and transfer of technology

Arguments against free trade

â€¢ Is a threat to domestic industries
â€¢ Encourages poor working conditions (poor salaries and loss of jobs)
â€¢ Lost revenue through reduced taxation and tariffs
â€¢ Can destroy local cultures
â€¢ Can deplete natural resources (because many companies for the same resources)
â€¢ Endangers intellectual property (there is theft of intellectual properties by rival companies)

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