Trade can be defined as the exchange of goods and services between people and/or countries or entities. Trade has been around for several centuries before money was discovered and approved for use as a legal tender. So what are some of the benefits and shortcomings of trade?
1. Creates Comparative advantage: Trade between people or countries creates a comparative advantage where people or countries are able to specialize and perfect on an aspect of trade as other countries perfect on another aspect.
2. Builds economies of scale: Trade creates demand for products that leads to increased economies of scale where costs are reduced with increase in supply of a particular product.
3. Lowers the prices of goods: Trade plays an important role in the reduction of the prices of goods and services by availing a variety of the same product where demand is high.
4. Increases quality of goods: Trade creates positive competition where companies or countries are forced to produce high quality goods in order to increase demand and the subsequent supply of the goods and earn increased profits.
5. Creates employment: Trade creates employment both within a country and in a company because it creates need for people to be engaged in meaningful employment in order to satisfy a need.
6. Encourages variety: Trade encourages the production of variety of goods because of the availability of the market. It enables companies and individuals to produce several goods and services thanks to the availability of the market.
7. Breaks down domestic monopolies: Trade also plays an important role in breaking down domestic monopolies that may sometimes be producing low quality products and selling them to consumers at very high prices.
8. Encourages transfer of technology: Trade encourages transfer of technology because companies and countries are able to learn from other companies who use the technology to produce their goods at a lower cost.
9. Encourages cohesion: Trade brings several people together for a common purpose of exchanging goods and services which encourages people and countries to relate thus fostering cohesion.
10. Builds relationships: Trade helps in building meaningful relationships between people and countries by promoting communication and engagement in business.
1. It can lead to overspecialization which may cause job losses: When people or companies specialize in the production of one particular product, this may lead to overspecialization whose effect would be massive job losses.
2. It creates unhealthy competition: Trade may sometimes create an unhealthy competition especially where people are more concerned about profit making than production of goods and service.
3. It may discourage local industries: Trade especially that involving countries may discourage local industries from developing because it encourages imports of cheaper goods and services into the country.
4. It encourages corruption: Trade is a platform for corruption to thrive because it gives an environment where deals have to be cut and promises made.
5. It may promote dependence on foreign goods: Trade can sometimes promote overdependence on foreign goods especially if the goods are of higher quality and come at a cheaper price.
6. It may lead to political slavery:
Trade can sometimes lead to political slavery because countries that depend on other countries for supplies may be pressed to follow orders and instructions from those countries and this may bring acrimony.
7. Cultural and religious complications: Trade breaks barriers and encourages interaction between people from various backgrounds. As a result, people may be forced to abandon their culture and religious beliefs because they have interacted and probably intermarried with others from a totally different culture.
8. It encourages debt: Trade is likely to encourage debt where countries or companies receive goods or services from other companies on credit because of the relationship that they have. This piles up and becomes difficult to pay up in the long run.
9. Loss of jobs: Trade may sometimes lead to losses of jobs especially in cases where political slavery is seen to be thriving.
10. Rivalry may sometimes lead to war: Trade rivalry between countries or companies that produce the same product or service may escalate and cause acrimony which may translate to wars to determine economic and political supremacy.
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