Sample Economic Essay Paper on International Trade

International Trade

From an economic point of view, trade gains are benefits accrued to agents as a result of consenting to trade with each other. It is an act of liberalizing trade, and hence increasing the producer and consumer surplus (Samuelson, 1962).

Questions and suggestions

What are some of the dynamics of trade gains?

Trade gains generally result from product specialization due to division of labor, scope and economies of scale. The gains may as well arise from increase in the overall output. Finally trade gains may result from trade in markets where agents sell their output in order to acquire other types of output.  Market incentives that are reflected in input and output prices attract factors of production, into activities where firms have comparative advantage (Samuelson, 1962). Owners of factors of production use increased income from those activities to buy goods which they would have rather produced at high costs. They hence gain from trading with other agents. In 1847, David Ricardo proved the theory of comparative advantage as a major basis of gains from trade.

How can trade gains be measured?

There are two main methods of measuring trade gains. The first measurement involves valuation of national income, where international trade raises the level of national income, hence helping individuals to acquire imports at lower prices. The second measurement involves gains that are valued in terms of trade. This involves application of the method of terms of trade since it is usually difficult to apply the method of comparison between production cost in foreign and domestic countries (Samuelson, 1962).

Which are some of the factors that affect trade gains?

Factors that affect trade gains include cost ratio differences, the forces of supply and demand, availability of factors of production, efficiency in production, terms of trade, and the size of the country.

Conclusion

The concept of gains comparative advantage with regard to gains from trade can be applied to the whole economy as an alternative to a national policy of economic independence. An aggregate of profits to the producer, surplus to the consumers, and increased output as a result of specialization in production is used to determine the aggregate trade gains. However, the gains may also be measured by examining the net benefits that a country accrues from lowering trade barriers e.g. tariffs o imports.
Reference

Samuelson, P. (1962). The Gains from International Trade Once Again. The Economic Journal, 72(288), 820. doi:10.2307/2228353