Why is there international trade?
Answer:
For the same reason there is any trade... why do you purchase groceries rather than growing them yourself?
Trade allows people to specialize. By focusing on producing one particular good or service, you become more efficient at producing said good or service and can thus create significant value which allows you to trade for other goods. You are better off than if you had tried to produce everything you needed or wanted on your own.
International Trade is a very real and very active part of the World today. Due to the advent of the internet and technologies that spawn from it there is truely no business that is isolated.
As to why there is international trade well companies like to make money and the only way to make new markets (assuming the domestic market is covered) is to go to another country and set up a new market for your product. Lets make an example say we have a product lets say a widget( a widget for you non-Economics people is simply a make believe product) Say this widget starts out in the US and we are a sucessful business and we have the money to expand to say Mexico and Canada, so what we do is set up a international department in our business ( the old adage is true you have to spend money to make it) so that we can ship and sell our product abroad to make more money for our business as it is the main purpose of our business to make a profit.
The primary rationale for international trade is comparative advantage.
Example: Suppose two countries have the same resources. Country A is technically efficient at producing planes and computers. It could produce 10 planes or 1 million computers each year. Country B, using the same amount of resources, could produce 8 planes or 400,000 computers.
Country A has an absolute advantage in producing both planes and computers, but it only has a comparative advantage in producing computers. Country B has a comparative advantage in producing planes. In Country B, each plane produced costs 50,000 computers foregone. In Country B, the opportunity cost of a plane is 100,000 computers. Hence, if each country were to specialize, A would build computers, B would build planes, and they would trade.
The same principle applies within a country, between firms.
1. Because other countries have things we want.
2. Because it is no longer socially acceptable to steal those things from other countries.
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