International Business essay
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International trade is the trade that takes place between two more countries. We cannot afford to neglect the role played by international on the global economy which affected economies of individual countries. This leads us to look into the relationship that exists between international trade and the world out put and the patterns of this type of trade. In this context of international trade, we therefore almost conclude that no country is independent and any brake in the flow of international will lead many countries into a crisis of a number of key commodities and services.
Heakal (2010) defined business as a process that involves exchange of produce and services between two parties. The parties may be individuals or organizations. Business can also be referred to as trade. International business is the type trade that takes place between countries. Countries buy goods and services that they do not produce from other countries; Countries also import goods and services to supplement their low produce and the opposite is true. International trade enables countries to secure larger market opportunities that may not available locally due to low demand. On the other hand, countries that import goods and services enables its citizens to have goods and services that may otherwise not be available to them as they are not produce locally. There for international trade is very important as it has the potential to affect the prices of particular goods and services globally e.g. petrol and its products. This happens as a result of effects of global events such as war, sports and industrialization on demand and supply.
Explain the relation between international trade and world output
Trade has a very strong relationship with total world output in the sense that if the world output is low; this implies low supplies to the international market and obviously high demand for the goods and services. Under this condition, prices for the goods and services go up. High prices resulting from low global output will lead low international trade. In contrast, high world output means high international supply that will lead to low demand hence low prices. This leads to high trade output (Heakal, 2010).
US-China Business Council ( 2011) argues that high prices in international markets occasioned by low world output can lead to recession in the economy of countries. Economic recession means that citizens are not comfortable to purchase goods and services that include imports. It is sad to note that recession also makes the country's currency very cheap in relation to other currencies of its trading partners. This means that it will pay expensively for imports
Pattern of international trade
In order to successfully describe the international trade pattern; it is necessary that we have a close look at trade and global output. This will enable us to get on the right track in explaining these patterns which are prone to change time after time. However, the international trade pattern does not show trading partnerships between specific countries in terms of the scale of income (UC Atlas of Global Inequality, 2006).
UC Atlas of Global Inequality (2006) notes patterns have been changing and especially in the previous three or so decades. As it is expected by everybody, developed countries had the highest exports at 75% as the remaining 25% of total world exports was from developing countries. The economically powerful countries mainly brought finished goods on the international market that constituted 83% of their total exports and this a whooping 63% of the total global exports. On the other hand, less developed countries' finished goods to the international market was 56% of their entire exports and this made up 14% of the total global exports. The pattern also shows that developed countries bring more unfinished products to the global market than less developed countries. Raw materials exported by developed countries makes 14% of the total global exports compared to 11% by the less developed countries.
Effects of cutting off international trade on the United States of America
International trade is very important in ensuring that countries find market for their surplus and also buy the products and services that are not adequate or totally unavailable locally. Cutting off international would cause a major crisis in the United States of America. This will lead to inadequacy in electrical equipments and other machinery. Machinery and other equipments including power generators are some of top imports by United States government. These are imported from China and cutting off trade between these two countries will make the United States of America unable to have electrical machinery and other equipments including power generators (US-China Business Council, 2011).
An example of another country that will be hurt in the process of cutting off international trade is the republic of China. In the event of this happening, China with machinery, electrical equipment, oils and mineral fuel as its top imports, will miss out on the required amount of these goods that are very vital in sustaining its economy. China imports these goods from Japan and South Korea.
Heakal (2010) asserts that in connection to the findings above, it can be concluded that international trade enables countries to fully exploit their resources and produce just enough goods for import. The country is also able to maintain a high economic status through foreign earnings from high exports. This is a state of high global output; a conducive environment for international trade. In general, developed countries have been on the forefront in terms of supplies of both finished and unfinished products on the world market. This has been attributed to low cost of production due to technological advancement among others. Lastly, any country cannot do without trade with others. For example, there is a high likelihood of an economic crisis in the US and or China as lack of international trade will deny them an opportunity to obtain their top imports goods that include machinery and power generators from China and Japan respectively.