Advantages and disadvantages of International Trade

Please write a short report on the advantages and disadvantages of international trade for the countries whose data you downloaded recently. You are required to illustrate your report with data and charts.

I) Introduction:

“The international trade is the exchange of goods, services and capital between countries” (Haekal, 2012). Trade exists for centuries but had known an international dimension with the globalisation. In this report, we will see some advantages and disadvantages of the international trade, through the examples of two countries: France and Italy.

II) The advantages of trade:

It exists many advantages to the international trade. We will see three of them, which are, meet the need of the country, create jobs and attract foreign investments in the country.

1) Meeting the need of the country:

By open its economy to the world, a country increase its growth and the satisfaction of the need of the people. The offer of goods and services is diversified. The result is better quality goods, lower prices, and functional design. The country may also sell the surplus in its production. This avoids losses and with the money earned, the country can buy products that it does not produce (dpcdsb, no date).

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(World Data Bank 2014)

In France the merchandise exports were multiplied by 2,63 between 1990 and 2012. In Italy, during the same period, the merchandise exports were multiplied by 2,94 (World Data Bank, 2014).

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World Data Bank

In France, the merchandise imports were multiplied by 2,87 between 1990 and 2012. In Italy, during the same time, the merchandise imports were multiplied by 2,67 (World Data Bank, 2014). These dates show us the trade of the two countries had known an important increase since two decades.

International trade can also permit to create job. Vimont (1993) agrees to consider that trade is a factor of job creation. He estimated that in France, more than 4 million jobs are related to export activity and more than three million of these jobs are linked with the export of industrial products. Even so, the imports can also create unemployment, he considers that the difference between the job creation and the job destruction is favour of the job creation with 500,000 jobs.

2) Attracting Investments:

International trade can also attract foreign investment and companies and by consequences create more jobs in the country. The Foreign Direct Investments enable technology transfer, particularly in the form of new types of fixed capital inputs. They promote competition in the domestic market inputs. Training staff for new businesses often accompanies them, which contributes to the development of human resources of the host country. It is also a good think for the government because they generate profits, which contribute to the improvement of tax revenues of the recipient country (dpcdsb, no date).

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(OECD, 2014)

Between 2005 and 2012, the inward FDI stocks in France increase of 58,89% (from 628 017 to 997 854 million US$) and the inward FDI stocks in Italy increase of 62,30% (from 224 079 to 363 677 million US$). Even if we can seed a small decrease around 2010, due to the effects of the subprime mortgage crisis, The Inward FDI stocks continue to increase (OECD, 2014).

III) The disadvantages of trade:

Whereas international trade has many advantages, it also presents some drawbacks. We will see three of them, which are the support of non-democratic systems, the cultural identity issue and the environmental issue.

1) The support of non-democratic systems:

With the globalisation and the trade, countries may have to support non-democratic systems. It is the case of China or Russia, which are major partners of trade with both France and Italy. In the top seven of the Italian imports, China and Russia are third and fourth with 6% each of the imports of Italy (CIA, 2014). Concerning France, in 2012, China was its second supplier with 8% of its imports and Russia the tenth with 2%. About the exports, China was the eighth customer of France with 4% of its exports and Russia the tenth with 2% (Alpha International Trade, 2014). On the contrary France and Italy do not appear in the top ten of the partners of China. That shows that these countries need China more than China needs them (Alpha International Trade, 2014).

This requires countries like France and Italy to support authoritarian countries. Let’s take the Chinese example, which is an authoritarian republic country with a single party. Chinese people freedom is limited and it is estimated that China pronounce more death penalties that all the other countries reunited (Amnesty, 2013). Yet it does not prevent the French Government from hosting the Chinese President with honour and comply with his every desire while France is against the death penalty (Hunffington, 2014). This shows the importance of economic partnership with China. It is the same with Russia. Although European countries disagree about the position of Russia in Ukraine, they have not stopped their economic partnerships (lemonde 2014).

Main partners of France in 2013

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(Alpha International Trade, 2013)

Main partners of Italy in 2012

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(CIA World Fact book, 2012)

Main partners of China (in 2012):

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(Alpha International Trade, 2013)

China appears in the main partners of China because they take in consideration the exchange with Taiwan and Hong-Kong. (Alpha International Trade, 2013)

2) The cultural identity issue:

The presence of multinationals creating standardized products can lead to a loss of cultural identity. Now, no matter that you live in the United States, France, Italy or China, you can wear the same clothes, eat in the same restaurants, watch the same movies. Cultural diversity can be a source of enrichment, but some people see it as a threat. In Europe, we assist to a rise of the Populist Parties, which are anti-globalization. For example, a French survey provides a score of 22% for the National Front for the European elections (Francetvinfo, 2014). The national Front is a political party, which wants France to heavily reduce its international trade.

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