Regional trade and international trade are a result of specialization and division of labor. In regional trade states, citizens strive to produce in larger quantities those commodities in which the economy has a comparative advantage, this exactly happens in international trade. In regional trade, people are likely to buy those commodities which are cheap as compared to those who are involved in international trade (Lancaster 79). The two trades involve the exchange of services and goods, the exchange involves two parties who reside in different locations.
Regional trade and international trade experience immobility of capital and labor. This is due to the physical locations of states and countries. The main reason behind the immobility of labor is the unwillingness of the workforce to migrate from one location to the other due to a variance in family ties, language, customs, patriotism, religious, monetary systems, and social conditions. On the other hand, regional trade and international trade both experience mobility of capital since capital does not depend on personal preferences.
This is because capital mobility depends on the rate of return that it can attract from the host country. However, most people find it secure to invest in their home country due to limitations in the rate of remuneration that arises from the factors of production.
Additionally, regional trade and international trade experience barriers to trade. Different states and countries have barriers that restrict trade from going on smoothly. The degrees of the restrictions that prevail in an economy are about the movement of services and goods across territories. The two trade experiences a considerable number of restrictions such as exchange control, tariff duties, and quota restrictions among others. As such, the economy experience similar problems, as a result, of the tariffs that are being imposed by the countries involved. Also, the two trades can utilize the same international trade theory.
The regional trade and international trade also have similarities about the differences in the currencies that are involved. However, regions may have limited variation in currency. In certain cases, each state has a different currency system, and as such when the countries engage in the exchange of services and goods they are likely to experience problems in exchanging currencies between different countries.
On the other hand, International trade facilitates globalization and the countries can engage in a competitive environment hence maximizing the gains of competition. This will encourage domestic industries’ development as well as increasing efficiency. Moreover, it will encourage the development of the economy due to international investment that will foster economic growth. It also facilitates the availability of cheaper imports due to the reduction of barriers involved in trade, and there will be a fall in the prices of imports.
International trade will also facilitate the creation of new technologies, hence an improvement of production processes and systems. Additionally, international trade results in an increase in consumer income, and this will increase the wage levels of the workforce; this is a result of multinationals that offer competitive wage packages. Again, international trade facilitates increased investment opportunities.
The opportunities arise due to the mobility of capital that is encouraged by fair return abroad creating attractive investment environments. Conversely, international trade destroys jobs creation in wealthy economies; this is due to the inflow of low-wage workforce from developing nations. The workforces that move are unskilled, thus saturating the job market, and as a result, the return on employment is lowered. Furthermore, economies lose their sovereignty due to international trade since countries sell their soul and loss their identity.
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