China: The Advantages And Disadvantages of International Trade

Topics: International trade, Economy of the People's Republic of China, Pollution Pages: 5 (1638 words) Published: January 19, 2013
International trade has always been an attractive idea for merchants and businessman since time immemorial. There is always an opportunity to sell more, make more profits, increase the market share, remove seasonality fluctuations of demand and supply, increase in productivity, and of course a business or even a country learns a lot on the product development technologies and strategies from doing business with other countries or regions. Trade also leads to higher GDP, better and more choices of products for consumers, increase in competition in domestic market leads to competitive prices which is good for consumers, competition also leads to better quality in goods and services, and reduces unemployment and poverty. Thus, this leads to growth and maturing of a countries economy as a whole and also the businesses involved.

Trade also leads to some problems that are not that obvious at the onset of trade. Even though trade tends to increase employment in one nation it may lead to job cuts in another. As businesses shift manufacturing for instance from richer nations to third world or developing nations, they take advantage of the cheap labor, weaker labor policies, weaker environmental policies, and support of the governments in these countries. They are able to recruit more and thus produce more for less. But this leads to job cuts in the parent rich nations. Trade also leads to job cuts in the developing and third world countries due to competition with multinationals from developed nations and also due to exposure to automation and modernization. Many businesses cannot put up with high productivity and competitive pricing of stronger businesses from richer nations and thus finally may lead to closing down of weaker businesses and unemployment in the face of competition. But we also have to realize that employment also increases through the new businesses from the richer nations. Overall there is a potential increase in employment. There is a problem of increasing income inequalities in China. As the business houses tend to take advantage of weaker policies in labor and environment, there will be environmental pollution leading to health and environmental complications; further labor discrimination leading to weaker social well-being. Businesses particularly also need to realize that protection of Intellectual property rights may not be recognized or understood or at least weak in some of the nations thus, leading to piracy, copyright violations, patents violations, product copies etc. This may well erode the competitive advantage, and the brand image of businesses.

The above comments on international trade can be closely associated with the international trade involving China. China has become the manufacturing hub of the world. Substantial part of the economy of China depends on international trade. The advantages it gives for other countries to setup manufacturing plants in China is its strong government support for FDIs, Infrastructure development, cheap labor, weak environment and labor laws, new strong market reach which includes China, India, Japan, Russia, Korea, Thailand, Vietnam, Indonesia, Malaysia etc, access to cheap Chinese supplier base, thus larger sales and profits, seasonality of product supply and demand can be managed (one can always sell the product in China and the markets close to it if the demand is lower in North America or Europe). US has profited considerably through trade with China. Sales of products from US have grown in popularity in China boosting US multinationals (Expanded trade with China has, in fact, been a blessing for large U.S. multinationals like Boeing, Caterpillar, and Cargill, which had trumpeted the prospect of a massive Chinese market for American products and services. China is the world’s fastest growing market for commercial aviation, and needs billions of dollars worth of airplanes from Boeing. Its growing infrastructure has been a boon for companies like...
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