Question

Why does international trade exist?

Answer 1

International trade is based on the principle of comparative advantage, complementarity, and transferability of goods and services and in principle, should be mutually beneficial to the trading partners. International trade is the result of specialization in production. It benefits the world economy if different countries practise specialization and division of labour in the production of commodities or provision of services. Each kind of specialization can give rise to trade. It is the basis of the world’s economic organisation and is related to the foreign policies of the nation. It is essential as no country is self-sufficient.