We have discussed international trade a few times throughout this module. Give an example of how 2 or more participating countries may benefit through international trade. What could be the potential negative impacts of such a trade?
The correct answer and explanation is:
Correct Answer:
An example of mutual benefit from international trade is the trade relationship between Kenya and China. Kenya exports agricultural products like tea, coffee, and horticultural goods to China, while importing manufactured goods such as electronics, machinery, and textiles from China. Both countries benefit: Kenya earns foreign exchange and supports its agricultural sector, while China gains access to raw materials and a market for its manufactured products.
300-Word Explanation:
International trade allows countries to specialize in producing goods and services they can generate most efficiently, based on their resources, labor, and technological expertise. This principle of comparative advantage ensures that both trading partners can benefit from the exchange.
In the case of Kenya and China, Kenya benefits by exporting products it can produce competitively, such as tea and flowers, which grow well in its climate and are in high demand abroad. These exports earn Kenya vital foreign currency, create jobs, and support rural economies. China, on the other hand, specializes in producing manufactured goods at lower costs due to economies of scale and a well-developed industrial base. By exporting these to Kenya, Chinese companies gain access to new markets, while Kenyan consumers and businesses gain access to affordable goods.
However, international trade also has potential negative impacts. One major concern is the risk of trade imbalances, where one country imports more than it exports, leading to debt and economic dependency. For example, Kenya has faced growing trade deficits with China, raising concerns about overreliance. Another issue is the decline of local industries, where cheap imports can outcompete domestic producers, leading to job losses and business closures. Environmental concerns may also arise when countries prioritize profit over sustainable practices.
In conclusion, while international trade fosters economic growth and interdependence, it must be carefully managed to ensure balanced, fair, and sustainable development for all participating countries.