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Importance of International Trade

Importance of International Trade

Importance of International Trade

International trade is the exchange of goods and services between countries; in short, it is one of the ways for countries to obtain goods and services that they cannot or cannot provide. Because of this, foreign trade is one of the main ways for countries to enjoy a wide range of fresh produce such as Pakistani mangoes in the UK (UK) and China. It also promotes the exchange of experiences between two different countries, including Africa and the United States (USA). In today’s highly globalized world, such exchanges have many advantages, which is why we will discuss the importance of international trade in depth in this blog.

Importance of International Trade

Importance of International Trade

Transactions are divided into two types of cash flows; exports (creating income for the economy) and imports (costing the economy). An export is a product that a receiving country sends and charges a fee to another country, and the receiving country receives products and services from another country to that country. The flow of imports and exports determines the balance of payments.
Since the turn of the century, the economy has become more open and has brought many advantages.

Employment Education

The employment rate in international trade is extremely high. An important example is Pakistan as part of the second phase of the China-Pakistan Economic Corridor (CPEC), which has a positive impact on Pakistan’s employment rate. Key sectors such as energy, infrastructure, agriculture and information technology have created more jobs.

This is because the more funds (investment) and experience (skill acquisition) exchanged, the greater the possibility of creating new industries that will ultimately drive the local economy. In this case, more jobs will be created and more people will be hired.



International trade also creates competition among countries by stimulating innovation. If two or more countries can produce the same products as mangoes, other countries will only trade with countries that produce and supply innovative mangoes of the same quality.

Using the same example of mangoes, the innovative way of presenting mangoes mainly means that they are properly handled and packaged. The top packaging keeps the fruit as fresh as possible. Therefore, there is an incentive for export innovation, because when the demand for products increases, this helps increase the country’s income through higher sales revenue.

Economies of Scale and Increased Efficiency

When a country expands production to exports, its innovative measures enable it to achieve higher efficiency, resulting in economies of scale. A country benefits from economies of scale, which means that it can efficiently manufacture products or provide services and enter new markets to expand its export base and make exports profitable for the country. Manufacturing country.

Various Goods and Services

Various Goods and Services

When a country imports, it provides its citizens with various goods and services that are not normally found in that country. An example of this is the South Asian mango, which is easily available on the market in the Kingdom of Saudi Arabia. U.S. citizens can choose from more than 700 grains. Similarly, many people in Pakistan can order real world-renowned brands, but there are no branches here.

People no longer need to go to specific places to try or buy products, now they can be bought everywhere.

The same goes for fast food restaurants such as McDonald’s, KFC and Burger King. In addition, financial services or free writing services are also some of the most common examples of transactions, which enable people all over the world to live comfortably and have multiple choices.

However, there is an objection, because experts also doubt that countries that start to export goods and services instead of producing goods and services will run the risk of putting people out of work.

Some experts even believe that this leaves little room for innovation and expansion of domestic industries and makes the economy too dependent on imports. This also disrupts the balance of payments and may have a negative impact on the country’s foreign exchange reserves.

Even so, international trade is also very important, and the government helps regulate the flow of imports and exports to maintain trade balance.

How does Pakistan trade?

Pakistan’s economy is dominated by agriculture, so it mainly exports agricultural products such as wheat, rice, vegetables, fruits, and beans. For example, Pakistan’s international trade includes the export of agricultural products and the import of equipment and manufactured goods.

As a major cotton producer, Pakistan exported 2.64 billion US dollars worth of cotton and cotton products to the world in the 2020-2021 fiscal year. United States. Pakistan has recently achieved double-digit growth in exports to China, Germany, the Netherlands and Poland. During this period, it increased by more than 30% to reach USD 2.33 billion, compared with USD 1.74 billion in the previous fiscal year, an increase of USD 586 million. Australia has grown by 33% in 2020 to reach US$281 million.

These are promising numbers for Pakistan because they indicate economic activity during the pandemic, especially given the significant slowdown in the global economy.This is mainly due to the expansion of the manufacturing base within CPEC, which not only creates jobs, but also introduces modern production methods to maximize output.

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