International trade opens up the opportunities of global market to the entrepreneurs of the developing nations. International trade also makes the latest technology readily available to the businesses operating in these countries. It results in increased competition both in the domestic and global fronts. To compete with their global counterparts, the domestic entrepreneurs try to be more efficient and this in turn ensures efficient utilization of available resources. Open trade policies also bring in a host of related opportunities for the countries that are involved in international trade.
However, even if we take the positive impacts of international trade, it is important to consider that international trade alone cannot bring about economic growth and prosperity in any country. There are many other factors like flexible trade policies, favorable macroeconomic scenario and political stability that need to be there to complement the gains from trade.
It however helps in the following ways:
1. Trade can help boost development and reduce poverty by generating growth through increased commercial opportunities and investment, as well as broadening the productive base through private sector development.
2. Trade enhances competitiveness by helping developing countries reduce the cost of inputs, acquire finance through investments, increase the value added of their products and move up the global value chain.
3. Trade facilitates export diversification by allowing developing countries to access new markets and new materials which open up new production possibilities.
4. Trade encourages innovation by facilitating exchange of know-how, technology and investment in research and development, including through foreign direct investment.
5. Trade openness expands business opportunities for local companies by opening up new markets, removing unnecessary barriers and making it easier for them to export.
6. Trade expands choice and lowers prices for consumers by broadening supply sources of goods and services and strengthening competition.
7. Trade plays a role in the improvement of quality, labour and environmental standards through increased competition and the exchange of best practices between trade partners, building capacity in industry and product standards.
8. Trade contributes to cutting government spending by expanding supply sources of goods and services and strengthening competition for government procurement.
9. Trade strengthens ties between nations by bringing people together in peaceful and mutually beneficial exchanges and as such contributes to peace and stability.
10. Trade creates employment opportunities by boosting economic sectors that create stable jobs and usually higher incomes, thus improving livelihoods.