International Trade Essay Example for Free

International Trade EssayRelation between c entirelying and population outputInternational administer represents the exchange of goods/raw materials and also manufactured goods (and services) between countries. This accompaniment occurs since a country has pull up stakesicular products or services that are much better than other countries in terms of quantity, price quality, or any other measurable factors. This idea further refers to a feel of competitive advantage.This condition encourages countries to bargain their goods and services with other countries to take benefit from the countries that can produce goods more(prenominal) effective and efficient. In the past decades, the increase of multinational trade has driven the integration of the world economy.Moreover, inwardly 1980 and 2002, the volume of world trade has raised carnal knowledge to world output. This condition exists because the traded goods have become cheaper relative to those goods that are not trad ed. Furthermore, the condition occurs due to the influence of three factors characterize the increase in trade as followingThe decreasing costs of trade. In transportation, communication and search, currency exchange and tariffs are all factors that influence when trading goods internationally. Within the past 20 years, these costs are falling suggesting that there would be an increase in the volume of trade.Second factor is the fact that tradable goods sector experience improved productivity growth. According to studies, it is found that productivity growth tends to be higher in the tradable goods sector than in the non-tradable goods sector. This government agency will in turn increase the ratio of trade to output.The third factor is the increase of income per head. The change magnitude income will likely drive consumers to shift their spending away from basic food and clothing products and into manufacturing goods, which adjure more differentiation, diversification and intern ational trade.Broad pattern of international tradeHistorically, trade has taken part since the existence of human being. While trade is not limited within countries, it develops into what we know as international trade or trade conducted among countries in the world.Paul Krugman and Maurice Obstfeld (1997) reveal that countries involved in an international trade based on two common reasons. First, they have goods that are different from others. Second, countries trade to achieve economies of surpass in production.To understand the international trade, there is a theory called pattern of international trade as suggested by several scholars. In the Ricardian Model, for example, international trade exists when each country exports goods in which it has a comparative advantage and the existence of international trade is due to international differences in the productivity of labor.Second turn up is from two Swedish economists, Eli Heckscher and Bertil Ohlin. Instead of solely determi ned by labor productivity as in Ricardian model, Heckscher-Ohlin theory emphasizes that comparative advantage is influenced by the interaction between nations resources (Krugman and Obstfeld, 1997).Relation between trade and world outputThe increasing oil price becomes critical and major problems of world economy. Its negative impacts seem to be the factors that haunt either industrialized countries or the developed ones. It is due to the negative impacts can lead everlasting(a) international economic ceding back. People around the world would never forget such economic recession happened in 70s.In the U.S. in order to reduce the dependence towards fossil fuel, they develop the utility(a) energy including the use of bio fuel. However, more than 90% of palm oil, raw material of bio fuel, is produced by Malaysia and Indonesia. If the two countries do not do trade with the U.S. for palm oil, the country may not offer bio fuel to their customers. acknowledgmentKrugman, Paul R., and M aurice Obstfeld. (1997). International Economics Theory and Policy. Addison-WesleyDean, Mark and Maria Sebastia-Barriel. (2004). Why has world trade vainglorious faster than world output? Retrieved January 21, 2008 from http//www.bankofengland.co.uk/qb/qb040304.pdfWild, J. J., Wild, K. L., and Han, J. C. Y. (2006), International Business The challenges of globalization (3rd ed.) (Chapters 4 6). Upper Saddle River, NJ Pearson-Prentice Hall.