Ihab Salloum[ad_1]
International Trade and the Importance of Trade Policies
International trade is largely based on the constant fluctuations in the world-wide economy, resulting in changes in tariffs, trade subsidies, and regulations. Keith Maskus, PhD, examined the relationship between trade policies and economic growth in his paper “Trade Policy and Economic Growth.” The main focus was to determine if variance in trade policies affects a country’s economic growth. The conclusion reached was that open economies tend to grow faster than closed economies, thus highlighting the benefits of open competition in terms of resource distribution, investment, and innovation.
The Impact of Trade Policies on International Business
For organizations involved in international trade, staying informed about trade policies is crucial. While there may not be completely closed economies, some countries have low import rates, resembling closed economies. One example is Brazil, which recorded only 13% import percentage in 2011. Therefore, it is necessary to constantly stay updated regarding the trade policies of countries one wishes to engage in trade relations with. The positive relationship between an open economy and economic growth suggests the potential profitability and success of a business venture under such circumstances. Analyzing potential gains or losses resulting from policy changes is important for businesses, as policies can significantly influence exports and imports, ultimately impacting profitability. A strong understanding of international business, including trends, profit/loss calculations, and predictions of economic stability, is essential.
The Role of Politics in International Business
The politics of a country can greatly influence trade policies, and it is advisable to engage in critical analysis to better understand a nation’s stability. Political factors vary from country to country, making it challenging to maintain a consistent and effective system. Politicians often focus on altering policies for their own benefit, which can affect international business. For instance, when there are strikes in South Africa due to political influence, investors tend to shy away, leading to instability for investments. Similarly, countries like Zimbabwe, facing political sanctions, become undesirable for investment regardless of potential profitability. Therefore, conducting thorough research on a country’s politics is essential before pursuing business ventures, as it provides crucial information for making informed decisions.
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