Why does international trade happen?
International trade permits the domestic markets to increase the variety of their goods and services, therefore increasing the level of welfare of the citizens of a country, and the goods which had confined access will be simply accessible.
Besides, some of the significant reasons which make international trade effective and vital are:
• The availability of resources: Based on its location, each country is rich in some resources which each country cannot produce. For instance, Middle East countries commonly have rich oil reserves, so they can export their oil to countries that do not have oil reserves. These resources can be in other forms like land, labor, monetary capital, and natural resources involving steel, gold, and diamonds.
• Production of goods: Natural resources are scarce worldwide, making it almost impossible to mass-produce goods that rely on them.
• The labor force.
• The amount of capital and services.
• Other global rates have a significant impact on international trade.
• Production cost: Typically, countries find it profitable to produce the goods and services that require the least resources and labor. Because it has a lot of suitable agricultural land, which many other nations do not use; for instance, India is the original home of many spices. As a result, it is possible to produce spices for India with little effort and expense, and it is regarded as one of the top exporters of spices in the world.
• Technology: Another significant element that influences demand for imports and exports is technology. Countries specializing in this industry help other nations through international trade because services like banking, communications, advertising, transportation, etc., are among the most significant factors that can be made much faster and easier when combined with modern technology. Due to infrastructural and technological restrictions, many nations are dealing with various issues.