Topics: International trade, Globalization, Free trade Pages: 9 (2800 words) Published: December 21, 2012
Introduction about Globalization of Business :
A business can be a success locally and have a strong local following but stretching that business further with the globalization of business can take it to another level. Business globalization, also referred to as international business, refers to the increased mobility of goods, services, technology, and capital throughout the world, goods and services created in one location are more commonly being found throughout the world. In 2000, the International Monetary Fund (IMF) identified four basic aspects of globalization: trade and transactions, capital and investment movements, migration and movement of people and the dissemination of knowledge International Trade relations :

International Trade is usually referred to the exchange of goods, and services across international borders or territories. In most countries, it represents a significant share of gross domestic product (GDP). In 2010, the value of international trade achieved 19 trillion (current US) dollars, i.e. about 30% of the world GDP. That is, about one third of the produced goods and services are exchanged internationally around the world. What is its Importance ?

According to "Global Policy Forum", till 2030, 60% of the world economy be exchanged internationally. That is the share of the rest of the world in each national economy will be more than the share of his own domestic economy. Many current evidences are in line with this prediction. For example, either country in the world is now member of, at least, one international trade agreement. In such circumstances, domestic economy will be affected more and more by the world economy. That is, the level of income, employment, wages, growth, and development in a country is not only a result of its domestic policies, but also determined by its position in the world economy. No market is spared by this fact. Consequently, a good knowledge of International Economics becomes vital for any economist. Some times, a good economic policy regarding his international relations is more beneficial than any policy arranging domestic economic issues of that country.

Why Nations Trade : Comparative Advantage
Countries trade with each other when, on their own, they do not have the resources, or capacity to satisfy their own needs and wants. By developing and exploiting their domestic scarce resources, countries can produce a surplus, and trade this for the resources they need. Goods and services are likely to be imported from abroad for several reasons. Imports may be cheaper, or of better quality. They may also be more easily available or simply more appealing than locally produced goods. In many instances, no local alternatives exist, and importing is essential. This is highlighted today in the case of Japan, which has no oil reserves of its own, yet it is the world’s fourth largest consumer of oil, and must import all it requires. The production of goods and services in countries that need to trade is based on two fundamental principles, first analysed by Adam Smith in the late 18th Century (in The Wealth of Nations, 1776), these being the division of labour and specialisation.

Increased Efficiency of Trading Globally
Global trade allows wealthy countries to use their resources - whether labor, technology or capital - more efficiently. Because countries are endowed with different assets and natural resources (land, labor, capital and technology), some countries may produce the same good more efficiently and therefore sell it more cheaply than other countries. If a country cannot efficiently produce an item, it can obtain the item by trading with another country that can. This is known as specialization in international trade.

Other Possible Benefits of Trading Globally :
International trade not only results in increased efficiency but also allows countries to participate in a global economy, encouraging the opportunity of foreign direct investment (FDI),...
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