International_Trade

International trade is the purchase, sale or exchange of goods and services across national borders. (Business Dictionary, 2011) International trade is important not only for the country exporting goods by means of revenue for the exporting country but also for the importing country by means of bringing in goods that a country may not have available. This trade relationship between countries provides a greater choice of goods to consumers and provides for job creation as well. International trade and world output relate to each other because of an economic stance. If the world output slows so does international trade. When the world output increases so does international trade. Economic recessions are one of the main reasons as to why international trade would decrease. When in a recession it means fewer consumers purchase domestic and imported items. A recession means that a countries monetary system looses value. Thus resulting in higher costs for imports and makes domestic products more affordable. Although international trade and world output are related, trade continues to grow faster than world output. The volume of world trade has increased significantly relative to world output; some of this increase can be accounted for by the fact that traded goods have become cheaper over time compared to the items that are not traded. The quantity of world output in a given year can affect the international trade for that year. The slower a countries economic output the slower the volume of international trade. The same is true for the reverse, the higher the output from a country the greater the international trade. Trade decreases and increases with the world’s economy, recession causes trade to decrease due to consumer spending because of economic uncertainty. When trade increases the recession decreases and consumers begin to spend. Exchange rates can also affect international trade, as countries currency weakens to trading countries it becomes more costly to do business with that country. This can affect the costs of importing goods from another country and can make domestic products considerably higher when they normally wouldn’t be if those products were within its borders. Countries that have higher income accounts for about 60 percent of the World’s merchandise trading, while trade between high incomes and low to moderate income countries accounts for almost 94 percent of the world’s merchandise trading. Knowledge of these percentages assists in determining who to trade with. Having this information is important because it allows countries to know whether or not there is a significant level of trade occurring between the richest and poorest nations in the world. If trade did not exist it could cause much chaos. If the United States were to stop trading with countries such as Brazil and Chile, we would have products such as coffee, cocoa and tea, tropical fruits and vegetables, spices and herbs, dried fruit and nuts. Many of us would be living without items that we have grown accustomed to. Other items such as leather and electronics such as televisions, mp3 players and DVD players because they are made in other countries such as China and Japan. According to World’s Richest Countries, the largest export of the United States is electrical machinery, airplanes and appliances. These exports alone generate over 70 billion dollars a year for the US. China has been one of the United States main suppliers when it comes to textiles and apparel. Trading has become an important part of the world infrastructure, without it many of the world’s largest and most economically sound countries would suffer. Many of us around the world have taken many luxury things for granted if trade ceased then everyone that participated in international trade would surely lose out on many products that we have all grown to love and are definitely accustomed too. Trading is an important part of our world economy and without it there would be poor countries with no sources of income. This could possibly cause a larger recession because it would be worldwide. Many people would be doing without because trading has become their means to making a legitimate income in order to support their families. References Business Dictionary (2011) International Trade http://www.businessdictionary.com/definition/international-trade.html A. Borin, R. Cristadoro, R. Golinelli, G. Parigi (n.d.) Forecasting World Output: The Rising Importance of Emerging Economies retrieved from http://epp.eurostat.ec.europa.eu/portal/pls/portal/!PORTAL.wwpob_page.show'_docname=2304414.PDF