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International Trade and Economic Growth

Discuss whether or not increased international trade can promote economic growth.

Category:

International Trade and Exchange Rates

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Answer

1. Understand the question: Before starting to write the essay, it is important to understand the question and what is being asked. In this case, the question is whether or not increased international trade can promote economic growth. Make sure to read the question carefully and identify the key points that need to be addressed in the essay.

2. Use evidence to support arguments: When discussing the reasons why increased international trade can promote economic growth, it is important to use evidence to support the arguments. This can include statistics, case studies, and examples from different countries. Similarly, when discussing the reasons why increased international trade may not promote economic growth, it is important to provide evidence to support the arguments.

3. Consider both sides of the argument: It is important to consider both sides of the argument when writing the essay. While there are several reasons why increased international trade can promote economic growth, there are also several reasons why it may not. Therefore, it is important to provide a balanced view and consider the possible externalities that may arise from increased international trade. This will help to provide a more nuanced and comprehensive analysis of the topic.

STEPS TO WRITE ESSAY 💡MAIN POINTS💡OVERVIEW

I. Introduction
A. Definition of international trade
B. Importance of economic growth
C. Thesis statement

II. Reasons why increased international trade can promote economic growth
A. Increase in the size of the market for domestically produced goods
B. Firms can specialize and achieve economies of scale
C. Increase in competitive pressure/making firms more efficient
D. Increase in access to products not available domestically

III. Reasons why increased international trade may not promote economic growth
A. Increase in the amount of imports, decrease in total demand of the economy
B. Domestic firms may not be able to compete causing less revenue, less profits, more unemployment
C. May result in shortages of goods in the domestic market
D. Make the economy more subject to sudden changes in demand and supply

V. Conclusion
A. Restate thesis statement
B. Summary of main points
C. Final thoughts and recommendations.

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Increased international trade is a highly debated topic in the field of economics. Some economists believe that it can promote economic growth, while others argue that it may not. Let us discuss both views in detail.

Why increased international trade may promote economic growth:

➡️Firstly, increased international trade can increase the size of the market for domestically produced goods, leading to an increase in exports and total demand.

This can help local firms grow and expand their businesses, creating more job opportunities and contributing to economic growth.

➡️Secondly, firms can specialize and achieve economies of scale through international trade.

This can reduce the cost of production and increase the demand for goods and services produced domestically. This, in turn, can contribute to the growth of the domestic economy.

➡️Thirdly, increased international trade can increase competitive pressure, making firms more efficient, reducing costs, and increasing productivity.

➡️Finally, increased international trade can also increase access to products not available domestically, such as raw materials to produce other goods, increasing the output of an economy.

Why increased international trade may not promote economic growth:

➡️Increased competition
International trade can lead to increased competition, which can result in a fall in economic growth. This is particularly true for industries that are not able to compete effectively with foreign firms. Domestic producers may be unable to match the prices and quality of goods and services offered by foreign firms, which can lead to a decline in demand for domestic goods and services, lower revenue, and ultimately, a fall in economic growth.

➡️Dependency on foreign markets
International trade can create a situation where a country becomes dependent on foreign markets for its economic growth. This can be problematic if the foreign markets experience a downturn, as this can lead to a fall in demand for the country's exports, lower revenue, and ultimately, a fall in economic growth. For example, if a country heavily relies on exporting oil to foreign markets, a decrease in global oil prices can negatively impact the country's economy.

➡️Exchange rate fluctuations
International trade can lead to exchange rate fluctuations, which can impact a country's economic growth. A sudden appreciation in a country's currency can make its exports more expensive, leading to a decline in demand for its goods and services. This can result in lower revenue and ultimately, a fall in economic growth. Additionally, a sudden depreciation in a country's currency can lead to higher import costs, leading to inflation and ultimately, a fall in economic growth.

➡️Negative environmental impacts
International trade can lead to a fall in economic growth if it results in negative environmental impacts. For example, the production of goods and services for export can result in environmental degradation and pollution. This can lead to a decline in the quality of life of citizens, lower productivity, and ultimately, a fall in economic growth.

➡️Political instability
International trade can be impacted by political instability, which can lead to a fall in economic growth. For example, if there is political unrest in a country, foreign investors may become hesitant to invest in the country, leading to a decline in investment, lower productivity, and ultimately, a fall in economic growth.

In conclusion, while increased international trade can provide several benefits to the domestic economy, it is important to ensure that the trade is balanced and that domestic firms are able to compete with international firms. Moreover, it is important to consider the possible externalities, such as shortages of goods and changes in demand and supply, that may arise from increased international trade. Therefore, a cautious approach should be taken when pursuing increased international trade to ensure that it promotes sustainable economic growth.

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