Trade Growth and Development Essay Example | Topics and Well Written Essays - 2000 words

Trade Growth and Development - Essay Example International trade is a trade or exchange of goods between two or more nations. This can be at the individual level, organizational, company level, or at the government level. International trade occurs when there is movement of goods across national borders. Economic growth is the increase in a country’s production measured in Gross National Product or Gross National Income or income per capita (Nafziger 2005). A sign of growth in the economy is shown by the boost in the quantity of trade conducted in a country, setting up of buildings, roads among other visible factors. Economic development, on the other hand, encompasses economic growth as well as the additional factors of changes in output distribution and economic structure (Nafziger 2005). The changes include improvements in the welfare of the citizens, their level of happiness, as well as, their physical health conditions among others. Contribution of International Trade in Economic Growth and Development Looking at the impact that international trade has had on the growth and development of economies, this article will divide the impacts into two parts namely; the impacts on the developing countries and the impacts on the developed countries. Each of the two categories will look at the gains and losses that have been the result of international trade on different economies. As the previous paragraph has suggested, there are varying implications of international trade in the different economies. The first focus is based on the developing world. It explores the positive and negative impacts of international trade on the developing world.... Additionally, specialization allows a country to stick to what it can best produce and leave what it cannot to those that can do so. This leads to economic growth and development because when it specializes in what it can do best, it’s able to maximize its resources and invest proceeds on welfare services like hospitals and roads which are vital indicators of growth and development of the economy. At the same time, the costs of production are prohibitive in most developing countries. Essentially, industries incur high costs to produce commodities and then charge high prices for goods. Among other reasons, most developing economies are labour intensive when it comes to production of their goods. Though the positive aspect of this is that it has created employment to a lot of people, it, however, is costly to the government. The benefit of international trade is that it allows importation of machinery that makes production cheaper and thus enhances the efficient production of go ods. As a result, the quality of manufactured goods improves thus allowing the countries to gain more from their products as a result of increased value of exports. Due to unfavourable balance of trade, the least developing countries have also opted to embrace the concept of value addition (Morton 2011). This means that they export some finished products though they account for about 10% of their income from export (Morton 2011). Though the level of processing is not as high as it is in many developed countries, the developing countries have managed to reach a level of being manufactures and semi-manufacturers as the line between manufacturing and owning raw products is blurred (Morton 2011). This is a