The development of a state is largely connected with its participation in the global economy. The more significant place a country occupies in the global market, the greater its economic benefit will be.
The entire global economy is based on the international division of labor and the exchange of goods produced. This is the production of goods and services within a single country in volumes that exceed domestic demand. Then the company can enter the foreign market.
A situation often arises when a country’s market is overcrowded or does not need a particular product at all. However, there is a client in another country who needs this product, but he cannot produce it, or organizing production would be too expensive. Then international trade occurs, that is, the exchange of goods and services between states.
Each country has certain unique resources due to its geographical location and other features. Depending on its economic and scientific-technical development, a country can mainly supply raw materials or finished products and services to the foreign market.
States and corporations participate in international trade to solve the following problems:
- eliminating the problem of resource shortages;
- growth of national income, as the sales market increases;
- expansion of opportunities for development and specialization of production.
Each state has two “counter” flows of international trade:
- export – sale of goods and services to the foreign market;
- import – import of foreign goods and services for sale on the domestic market.
States often strive to produce and export the maximum amount of goods and services, but at the same time preserve the domestic market for their producers as much as possible. For this purpose, there are various ways to regulate foreign trade: customs and tax tariffs, licensing, standards, etc. In special cases, an embargo is used – a restriction or complete ban on the import of certain types of goods into the country.
States also use long-term methods of managing economic activity. To this end, they stimulate the development of domestic production with the help of subsidies, tax breaks and other instruments. Thus, in the long term, the competitiveness of their own producers on the world market increases.
Each country chooses its own version of foreign trade policy development:
- Free trade. The state practically does not interfere with the development of foreign trade, leaving regulation to the discretion of the market.
- Protectionism. The state primarily protects the interests of its own producers.
- Mixed model. Combines features of protectionism and free trade in varying proportions.
