By developing and exploiting their domestic resources, countries can produce a surplus. They may use this surplus to buy goods they need from abroad, i.e., through international trade.
International trade has existed for more than 9,000 years. Long distance trade – before the existence of nation states and national borders – goes back much further. In fact, it goes back to when pack animals and ships first came onto the scene.
Our modern industrialized world would not exist if countries did not import and export. Put simply; international trade is at the heart of today’s global economy. Global interdependence is a fact of life for every country today.
We import goods and services for several reasons. Below are some reasons:
– Price: a foreign company can produce something more cheaply.
– Quality: may be superior abroad. For example, Scotch whisky from Scotland, in most people’s opinion, is superior to any local alternative. That is why Scotland exports about 37 bottles of Scotch every second.
– Availability: it might not be possible to produce the item locally. Therefore, the only way consumers can buy it is by importing it.
A raw material, such as oil, iron, bauxite, gold, etc. might not exist at home. Japan, for example, has no domestic reserves of oil. However, it is the fourth largest consumer of oil in the world. Japan imports virtually all its oil.
– Demand: might be greater than local supply. To satisfy the difference, it is necessary to import.
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