There are many potential gains from international trade that benefit the businesses and countries that engage in trade around the world. International trade creates new markets for domestically produced products, and it often results in the introduction of new products into domestic markets. Different countries have access to different resources and are, therefore, able to produce some products more cheaply and efficiently than others. As such, one of the major gains is that some products that would be expensive to produce domestically can be imported at a much lower cost. Though there are many gains from international trade, disadvantages also exist, such as the high initial costs of entering a new foreign market and the necessity of dealing with strict international trade laws.
In many cases, different businesses and nations have access to different raw materials and technologies that allows them to produce certain types of products more effectively than others. There is also a wide range of business strategies that different businesses around the world use. International trade allows nations and businesses to specialize in producing products that they have the best resources and materials to produce. It also allows for the spreading of useful technology and new business strategies. In ideal circumstances, the gains from international trade benefit all nations and businesses involved.
Competition is a major element of international trade. Introducing a new product from another nation into a domestic market forces domestic producers to compete against the international products. This competition can stimulate a domestic economy by encouraging innovation and revision of market strategies to make better products and develop more efficient production methods. Domestic gains from international trade involve not only product competition, but also cost competition. A domestic producer with a monopoly on a given product can charge a premium for that product, but this is not generally an option when there is international competition.
Gains from international trade can also involve some level of increased domestic security and independence. A nation with an economy that depends on harvesting a certain amount of a given crop each year can be utterly devastated by a drought or by flooding. Having access to international markets can help that nation reduce its dependence on that crop or on other particular domestic markets. International trade can also help to stabilize market fluctuations that can occur on a seasonal basis by providing year-round access to trade options outside of the domestic market.
