International trade: benefits, barriers and business

For businesses, globalisation 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 trade 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.

International trade at a national level

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 favourable 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 capitalise on specialisation. This is where traders specialise in different areas to serve particular markets, making the most of upgrades, innovations and efficiencies.

What are the barriers to international trade?

On the face of it, trade may appear simple, with two parties benefitting from the exchange: one receiving required goods or services, the other payment. However, there exists a wealth of theory, policy and business strategy that constitutes international trade – including trade barriers. These can include:

• Voluntary Export Restraints (VERs)
• Regulatory barriers
• Anti-dumping duties
• Subsidies
• Tariffs
• Quotas

The World Trade Organization (WTO) is a global international organisation that exists to monitor and uphold trade policy agreements between nations, supported by trade data. Trading nations worldwide – and their parliaments – collaborate to establish, negotiate and sign WTO agreements, which aim to help producers, exporters and importers to conduct business. 

Supporting trade negotiations, such as regional trade agreements, and examining data sets – such as a country’s balance of payments – helps to establish and uphold a global trading system that is more reliable, open and predictable for all involved.

Brexit: a case study of changeable trade barriers

We need look no further than the United Kingdom’s well-documented exit – better known as Brexit – from the European Union (EU) in January 2020 as an example of the impact of trade barriers.

Long-established UK-EU trade arrangements were disrupted by Brexit. Reorganisation of supply chains and a reduction in trade intensity – trade statistics from economists indicate a 15% reduction of both imports and exports as of October 2021 – continue to cause issues as businesses have been forced to renegotiate with trading partners and source other routes to market. 

While the global economy as a whole suffered impacts to trade as a result of the pandemic, it has still recovered to levels above that of UK trade. It is yet to be fully known how the UK economy will emerge on the other side of both its changing EU status and the pandemic.

Become an expert in international trade logistics and supply chain management

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You’ll have the opportunity to gain the critical skills, knowledge and practical tools to implement effective chain management, through flexible learning that suits your needs. This master’s degree includes specialist modules in logistics and operations strategy, and procurement and supply management, as well as wider aspects of business such as marketing, people management, and finance and accounting.