Choosing a career in international trade has many advantages. One is that you have a wide variety of employment options at your disposal. You could pursue a career in international business management, international marketing, supply chain management, or international trade finance, depending on your interests. Equally varied are your alternatives for working with and where you work. You might collaborate with traders, trade hubs, nations, and corporations all across the world.
Additionally, the trade market is still expanding steadily, especially in British Columbia. According to Statistics Canada’s most recent report on foreign merchandise trade, overall imports and exports will reach record highs in 2021 at $57.7 billion and $53.9 billion, respectively.
It is simple to understand why someone might be interested in a career in international trade given the record numbers in the trade sector and the career path’s wealth of varied chances. What about broad advantages or benefits, though? What broader effects might international trade have?
Exactly that is what we shall investigate when we examine the seven most important advantages of global trade.
- More Job Opportunities
Beyond the job opportunities available in a career in international trade, the industry helps to generate jobs as companies expand their available markets. As the available market grows and market share increases, naturally manufacturing and service capabilities expand as well. The end result is more job opportunities are available for the working class.
- Expanding Target Markets & Increasing Revenues
As mentioned in the previous benefit, more jobs are created when companies expand their target markets and demand increases. Beyond job creation, a larger target market allows companies to run production without the fear of overproduction as any excess products produced can be sold internationally. Each country a business adds to its list opens up new potential for business growth and increased revenue.
- Improved Risk Management
In addition to a larger target market size, international trade offers the opportunity for market diversification. When a company focuses only on the domestic market, there is increased risk from economic downturns, environmental events, political influence, and many more risk factors. By becoming less dependent on a singular market, companies reduce the potential risks associated with their core market.
- Greater Variety of Goods Available
Trading internationally provides consumers and countries with the opportunity to purchase goods and services that are either not available or more expensive to produce in their own countries. A simple trip to a local supermarket or electronics store will quickly demonstrate the impact of international trade.
- Better Relations Between Countries
The economic interdependence of countries that results from international trade can lead to strong relationships of cooperation in other areas. When countries engage in a substantial amount of trade, they are more likely to avoid other areas of conflict between the nations.
- Enhanced Company Reputation
Trading globally can provide a boost to a company’s reputation within the international market. When a company has success doing business in one country, it can significantly influence the success of that company in neighboring and nearby countries as well. While difficult to quantify, the rise in company credibility can have a huge impact when targeting an entire region as opposed to singular countries.
- Opportunities to Specialize
By participating in international markets, companies may be presented with opportunities to specialize in a particular area to serve a particular market. When countries cannot efficiently produce a good or service, they can seek to acquire it through trade with another country. These opportunities to specialize often lead to greater efficiency in production, higher levels of innovation, and increased quality of development. This may provide companies with a long-term competitive advantage and growth in terms of their global market share.
The benefits of international trade are all around us. When you go to the store and pick up some coffee or wine from South America for example, you are directly experiencing the benefits of international trade. The same applies when you are browsing social media apps on your cell phone or streaming your favorite movie or tv show on your laptop.
Beyond the modern conveniences of technology and the delicious food and drink imported from around the world, international trade creates job opportunities, contributes positively to the economy, offers multiple paths for companies to grow, and even helps to improve relationships between countries.
For businesses, globalization can open up a – very literal – world of opportunities. Access to the global economy provides business leaders with new markets, new trade, new routes to consumers and new revenue streams, and nations with fundamental economic, social, political, and cultural advantages.
International trade refers to the exchange of products and services between people or entities in two different countries. It’s a trading system more commonly referred to as imports and exports: the former relating to goods that flow into a country from abroad, the latter to goods that flow out of a country to be sold overseas.
The World Bank Group states that trade plays a central role in global poverty.
A country that participates in international trade is more likely to grow faster, innovate, improve productivity, and provide more opportunities and higher incomes for its population. As such, it’s key to increasing both the overall Gross Domestic Product (GDP) of a country, and average national wages (GDP per capita) for its people.
Free trade – also known as open trade – refers to trade without restrictions, including tariffs and quotas, between countries. It’s known to benefit lower-income households, as consumers access more affordable goods and services, and countries with a lower GDP who benefit from comparative advantage can become key players alongside wealthier nations.
International trade makes cross-border exchange easier, supply chains and logistics more reliable, and customs procedures more streamlined. On both a local and global level, it is critical in driving economic growth.
International trade at a business level
As well as supporting the economic development of countries, there are plenty of benefits of international trade for business leaders. Examples include:
- Increased revenues. International trade can be extremely advantageous for increasing the number of potential consumers – leading to business growth, larger market share from greater market access, and higher profits.
- Decreased competition. Depending on the product or service, exporting overseas could open up new markets that are less crowded or saturated than domestic ones.
- Longer product lifespan. Over time, domestic consumers may stop buying goods – or start upgrading to different versions – while the same may not be true for international markets. Keeping an eye on emerging markets may result in further demand for products and increased sales.
- Easier cash-flow management. For multinational businesses, receiving payment upfront for international transactions may be prudent. In home markets, creativity and caution can be required to maintain cash flow while waiting to receive payment.
- Better risk management. Diversification is critical to businesses wishing to remain relevant, competitive and resilient. International trade offers this advantage; while a domestic market may be disrupted due to economic, political and environmental factors, operating in multiple markets helps to manage risk and weather adversity.
- Benefitting from currency exchange. Global trade and currency fluctuations can be advantageous for exporters. When domestic currency is down, businesses may be able to export more as international buyers benefit from a favorable exchange rate. Currency conversion – from selling in markets where the currency is stronger than the domestic currency – can boost bottom lines once converted back.
- Disposal of surplus goods. When goods are no longer selling well in a domestic market, exporting to international markets can offer alternatives to help shift otherwise superfluous stock.
- Enhanced reputation. Selling internationally can raise a company’s profile, increase trust and credibility and boost brand reputation. Success in one country can influence success in others.
Taking advantage of international markets can also offer business leaders opportunities to access export financing, as well as capitalize on specialization. This is where traders specialize in different areas to serve particular markets, making the most of upgrades, innovations and efficiencies.
What are the Benefits of International Trade?
If you’ve never traded outside of your native country before, it can be intimidating to decide to switch your company from domestic to international trade. Trading internationally has benefits that can take your company to the next level, even if it is a big step and there are a lot of regulatory issues to take into account.
1. Increased revenues through international markets
According to the 2016 FedEx Trade Index, 65% of small businesses that were trading internationally reported an increase in their revenue, as opposed to 46% who were not trading with other countries. The main reason for this is likely to be that global traders have a much broader potential customer base.
For most businesses, this is one of the key advantages of international trade. For small businesses, it could be the difference between staying stagnant or excelling to the next level.
2. Mitigate potential market risks
It might seem risky to begin trading internationally if you’ve only traded domestically, but it actually offers greater risk management. If you only sell in your own country, you will be impacted by economic downturns and market changes, whereas when you trade internationally, you’re not relying on a single market. This means if there is a recession in your domestic market, you may still have viable business opportunities in other countries where the economy is stronger.
From a risk management perspective, it’s safer to trade globally than solely domestically, and this is one of the other key advantages of international trade that persuade a lot of businesses to expand globally.
3. Manage cash flow better through foreign markets
It’s common practice to request payment upfront when trading overseas, and this is naturally beneficial when it comes to cash flow. Upfront payments will allow you to continuously bring in more business and manage your operations without having to worry about delayed invoices.
Requesting payment from clients upfront, especially for large orders, isn’t as common in domestic trade circles, and while this can be more beneficial for the client, it does pose the risk of cash flow issues when business slows down.
4. Boost your reputation through global trade
Companies that trade internationally often find that they can provide a better standard of service, and therefore benefit from a quality reputation. Clients will correlate international success with reliability, efficiency and cohesion, especially if you have the facilities to maintain compliance across your trading operations. If clients can see consistent and compliant successes across other countries, you are more likely to see bigger, better business coming your way.
5. Dispose of surplus products
There may come a time when the product you sell becomes obsolete domestically, which leaves you with unwanted surplus products. Domestic markets differ from international markets, meaning just because there isn’t a demand for your product in your own country, there may well still be a demand across foreign markets. This reduces the risk of waste and minimizes potential losses related to surplus products.
6. Increase product lifespans
No matter what kind of product you are distributing, there’s bound to be an upgraded version soon making its way to market. In time, this can hamper the lifespan of your product, creating surplus and having an impact on your returns. By trading internationally, you can extend the lifespan of your product since other markets may not necessarily move at the same pace as your domestic market.
7. Balance foreign exchange risks
Currency fluctuates regularly and this has an impact on all aspects of trade, be it domestic or international. For the most part, when your domestic currency is weak, an economic downturn typically follows suit, and this means your business may suffer. Not just this, but it’s more expensive to import goods, too.
A poor currency rate can spell trouble for domestic-only businesses, but it opens up the door for international trading businesses as it means they can export their products for cheaper, therefore enticing more foreign buyers to make a purchase. While you might have to sell your goods at a cheaper rate, there’s every chance you can sell more units. In addition, if another country has an economic downturn and a poor currency value, you can quickly import goods at a lower cost to help facilitate higher returns in the future.
The global economy is more robust than a single market, with seemingly endless opportunities for economic development and growth. This means foreign trade can prove to be more reliable than a single domestic economy.
Navigating the global market can be complex. You will need to become familiar with import and export processes, contractual terms and rules of origin, as well as how foreign exchange works on a large scale.