Benefits of trade exchange
The benefits of trade are summarized as follows:[١]
- Increase revenue
Expanding markets gives companies the ability to increase the number of potential customers, opening a new avenue for business growth. And increase revenues, which is reflected in accelerating growth. Companies, and increase their employment rates.
- Narrowing down competition
The crowding of products and services in one market reduces companies’ opportunities for growth, due to the strong competition among them for a limited number of customers, while opening new markets in more than one country reduces the opportunities for competition, reaches a larger number of customers, and thus enhances growth opportunities.
- Extend the life of products
Sales can decline over time as local customers stop buying or move to newer versions, while moving to foreign markets and new customers extends the life of products.
- Facilitate cash flow management
International trading is characterized by payment advance In exchange for products or services, while deferred or instalment payment is an advantage of domestic trade, expanding trade abroad helps manage cash flow better.
- Better risk management
Focusing on the domestic market exposes companies to increased risks from downturns, political and environmental factors, and other risk factors, while expanding markets mitigates those risks.
- benefit from surplus goods
International trade serves as an important outlet for taking advantage of surplus goods that are difficult for companies to promote in the local market.
- Take advantage of currency exchange rates
Companies that rely on international trade benefit from currency exchange rates, as a decrease in the value of the exporting country’s currency contributes to Earn more profits resulting from sales in markets where currencies have seen their prices rise.
The concept of trade exchange
The concept of trade refers to a barter system between countries, companies, and individuals through which goods and services are exchanged, either by one party paying cash In exchange for getting On goods or services, or exchanging surplus goods or services for other goods or services from the other party.[٢]
Determinants of trade exchange
The relationship between the prices of primary commodities and manufactured goods is known as “the determinants of trade,” and can be defined as the ratio of the average value of a country’s exports to the average value of its imports. Economists have summarized these determinants in the following points:[٣]
- Technological development affects trade exchange, as the more advanced countries become technologically advanced, their tendency to demand raw materials decreases relatively, which contributes to a decrease in the prices of those materials.
- The increase in labor wages affects industrialized countries and their inflation rates rise, causing a steady rise in the prices of their goods.
- The high costs of production in industrialized countries are reflected in the less developed countries, which are forced to To pay more for What you import.
- Price changes occur in the short term, resulting in no significant changes in the supply or demand for primary commodities, while a large and sustained increase in prices leads to a decrease in demand and the emergence of substitute products.
- Price fluctuations negatively affect growth rates in commodity-producing countries through their impact on export revenues, especially if the country relies on exports of a single commodity.
the reviewer
- ↑ Bruna Martinuzzi (21/3/2018), “What Are the Advantages of International Trade?”, AmericanExpress, Retrieved 11/1/2022. Edited.
- ↑ “Exchange and Trade”, Econlib, Retrieved 11/1/2022. Edited.
- ↑ “The terms of trade”, Britannica, Retrieved 11/1/2022. Edited.
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