Why Is International Trade Important?

International trade allows people to pay less for products. Some areas of the world can manufacture products for less money. Other areas excel at producing high-end, innovative products.

The cost of labor in China, India and other parts of the world is lower than developed nations, and they can manufacture items at a lower price point. Even after factoring in the cost of transportation, the products they manufacture as less expensive, and people around the world pay less as a result. International trade facilitates these savings.

The United States, Japan and much of Western Europe, on the other hand, have well-educated employee bases and the infrastructure needed to innovate and create new products. These products are primarily used in the developed world, but they provide benefits to developing nations as well. Inexpensive computers, for example, allow people in poorer nations to access the Internet.

However, international trade can cause short-term and long-term problems. The developed world no longer has as many low-skill manufacturing jobs as it once did. In addition, developing nations are less likely to invest in research and development, as they cannot spend as much as companies in richer nations. However, the cost savings and innovations provided by international trade are widely believed to make up for these problems.