Economics in economic trade.

The impact of Covid- 19 is not only exhibiting distressing results on the health care sector. But also, the wide range of possibilities for the predicted decline and the uncertainty around its precise economic impact to developed and developing economies.

A healthy economy is one where both exports and imports are experiencing growth. This typically indicates economic strength and a sustainable trade surplus or deficit. If exports are growing, but imports have declined significantly, it may indicate that foreign economies are in better shape than the domestic economy. Conversely, if exports fall sharply but imports surge, this may indicate that the domestic economy is faring better than overseas markets.

Exporting primary goods (commodities) in which a country has a natural comparative advantage.

Import substitution — where a country develops a domestic manufacturing capability and capacity e.g. tomato growing businesses can build tomato processing factories.

Export-focussed manufacturing production taking advantage of lower unit cost labour and increasing economies of scale in production.

Trade

When we stop moving, resources stop operating, supply stop working, production stop creating, country stop responding in trade. “The unavoidable declines in trade and output will have painful consequences for households and the business sector.’’

What if the trade affects?

Role of trade plays a very vital role in accelerating the economic engine, it has very significant importance. Countries’ differing natural resource endowments — and their uneven geographical distribution — play a critically important part in explaining international trade.

Traditional trade theory emphasizes that differences in factor endowments prompt countries to specialize and to export certain goods or services where they have a comparative advantage.

This process allows for a more efficient allocation of resources, which in turn leads to an increase in global social welfare — the “gains from trade”.

Daily monitoring of trade developments in real-time will help provide a reliable early warning regarding potential economic contagion effects amid the pandemic.

A country’s importing and exporting activity can influence its GDP, its exchange rate, and its level of inflation and interest rates. A rising level of imports and a growing trade deficit can have a negative effect on a country’s exchange rate.

A weaker domestic currency stimulates exports and makes imports more expensive; conversely, a strong domestic currency hampers exports and makes imports cheaper. Higher inflation can also impact exports by having a direct impact on input costs such as materials and labour.

The increasing complexity of trade has serious implications for the world’s poor, who often are disproportionately disconnected from global, regional — or even local — markets. Poverty is often concentrated in geographic areas that are poorly connected to active economic centres. Firms and communities in these areas miss opportunities to develop skilled, competitive workforces; they are not integrated into global production chains and are less able to diversify their products and skills.

There are also distributional consequences of increasing trade. While on aggregate, economies gain enormously from increasing trade, as competition increases and many good jobs are created in export sectors — the wages of workers in import-competing industries may suffer or some workers may lose their jobs.

with gratitude,

Santosh gade.

#livelearnexplore

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