Posted by Timebusinesstoday.com – The definition of international trade is the transaction activity of buying and selling goods and services between countries.
Transaction actors in international trade are individuals between countries, individuals and governments between countries, governments and governments between countries.
The aim of international trade is, among other things, to increase gross domestic product (GDP).
Apart from that, international trade also increases industrialization, transportation advances, globalization, and the existence of multinational companies.
Before knowing what the driving factors are for international trade, first find out more fully about the definition of international trade according to the following experts, compiled from various sources.
Understanding International Trade According to Experts
According to Setiawan and Lestari, international trade is trade carried out by residents of one country with residents of other countries on the basis of mutual agreement.
The population in question can be between individuals, between individuals and the government of a country or the government of a country with orders from another country.
Then, according to Basri and Munandar’s view, international trade is trade that occurs because there are countries that have different resources from the countries they are collaborating with.
This international trade can occur due to the activity of producing goods in quite large quantities.
Meanwhile, according to Huala Adolf, international trade is an activity of exchange or even buying and selling activities that occur between countries as an effort to obtain benefits or profits from these activities.
Factors Driving International Trade
1. Needs of the state and society
Each country is considered unable to produce all the needs of its nation and society, so international trade is carried out to meet needs.
2. Differences in natural resources
The natural resources of each country are not the same because of their different geographical locations. For example, Indonesia and Australia carry out international trade, namely Indonesia needs Australian livestock products and Australia buys Indonesian agricultural products.
This is based on Indonesia being rich in agricultural products such as coffee, pepper, cloves, tea and others and Australia as a producer of livestock such as cattle.
3. Improve the quality of human resources
Human resources must be improved because competition in the market is increasing. Therefore, HR must improve their own quality so that they are not inferior to their competitors.
4. Increase state income
The benefits of international trade are to increase country income so that the export and import process is made easier.
The country will receive income from goods taxes and export or import transaction income.
5. Expansion of target market
International trade also encourages companies to expand their target markets by producing goods on a large scale.
Later, excess production quantities can be directed to foreign markets.
6. Climate differences
The different climate in each country will affect production results. For example, the tempeh consumed by Indonesia uses imported soybeans from other countries. Even though Indonesia is a country that can produce soybeans.
However, Indonesia’s climate makes the quality of soybeans less good, so the government has adopted a policy of importing soybeans.
7. Differences in taste
There are differences in the tastes of each society between countries. For example, country A produces fruit and vegetables while B produces beef.
The two countries carry out international trade and it is mutually beneficial because people A prefer beef and B predominantly likes fruit and vegetables.
8. Interstate transportation
The driving factor for international trade is transportation such as land, namely trains, trucks, and others. Air transportation is like an airplane and sea transportation is like a ship.
9. Seek overseas support
International trade boosters are also useful for seeking foreign support when the country needs it. When you have many trading partners, foreign support for that country will also increase.
Benefits of International Trade
Sadono Sukirno explained the benefits obtained from international trade:
- Building friendship between countries, because of their mutual need for each other.
- Obtaining goods that are not produced in your own country. Factors that influence it include geography, climate, level of mastery of science and technology and others.
- Benefit from specialization. Because one country can specialize in certain goods. Even though all countries can produce the same goods, it will be profitable to import goods from countries that specialize in certain goods.
- Expand the market and increase profits. International trade allows entrepreneurs to run their machines optimally. Additionally, they can sell excess products overseas.
- Modern technology transfer. Foreign trade allows a country to learn more efficient production techniques and more modern ways of management.
Benefits of International Trade
- Production cost savings
- Meeting domestic needs
- Cooperation between countries
- Increasing sources of state revenue
- Expanding job opportunities.
Losses of International Trade
The inability to adapt to the global market causes the country’s economy to decline
Domestic production that is unable to compete with imported goods will be abandoned by consumers.
That is the meaning of international trade, its driving factors, benefits, advantages and disadvantages. Hope it is useful!