What drives International Trade?

[Capt Manoj Singh]

Dear All:



I would like to invite opinions of others to help me improve my understanding of the economics behind International Trade.



Worlds resources are unequally divided and that gives the primary impetus to International Trade. However, this trade would not take place if there is no cost advantage obtained by the transaction. In other words, the cost of the goods including transportation and tariffs should be cheaper than the cost of the goods if it were produced locally. This brings another element into the equation - currency.



If a currency was valued higher there would be a net flow of goods and services into the country like in U.S.A and E.U countries. Cash strapped countries thus get richer and the poor countries get poorer and into debts.



Am I right in my thinking? If yes, then who determines the relative buying power of various currencies? And what mechanisms are in place to stop a country in printing extra currency to ensure that there is always a net goods and service flow into the country?

[priyarawat229]

Part of the reason for this is that international trade with countries where production costs are cheaper because wage rates are lower and raw materials widely available means that there is greater competition and this means that the end price to the consumer is lower than it might be for the same goods to be manufactured at home.

[priyarawat229]

Export/International business can take on many challenges as it unfolds. Goal should be to construct the company's strategic building blocks, using it's assets to support international opportunities. The outline is formatted from a more basic approach, increasing through stages of complexity.

[Capt Manoj Singh]

[quote name='priyarawat229' date='26 July 2012 - 01:11 PM' timestamp='1343304185' post='115244']

Part of the reason for this is that international trade with countries where production costs are cheaper because wage rates are lower and raw materials widely available means that there is greater competition and this means that the end price to the consumer is lower than it might be for the same goods to be manufactured at home.

[/quote]

Thank you Priya but the following still remains unanswered:



what mechanisms are in place to stop a country in printing extra currency to ensure that there is always a net goods and service flow into the country?



I would greatly welcome your thoughts on the above. Thanks!!