International Trade

International Trade

Rodamia shares its borders with three countries Uthania, Alfasia, and Suntize and has begun considering the possibilities of trade with them. Rodamia is a large country, the largest compared to its neighbors in terms of area, population, and level of economic development. Four percent of the country's Gross Domestic Product (GDP) comes from agriculture, mainly corn, wheat, cotton, and dairy and poultry products; 30 percent comes from industry; and 66 percent comes from services.

What are the advantages and limitations of International Trade in the simulation?

International trade is essential and important for every country. That is due to the fact that nations are capable of producing different capacity and quality of products. Moreover, the cost of resources like land, labor, capital, and entrepreneurship could be dramatically different even between neighboring states. Each country wants to optimize its wealth by using these resources as efficiently as possible. To maintain low cost a country will export goods that have a low production cost and import goods that are more cost prohibited elsewhere.

As in any economical equilibrium there are pros and cons to international trade. Control mechanism must be put in place to insure that trade laws are not broken. If a nation has a long-term fiscal plan this objective can be met through the development of healthy trades with foreign countries. As the simulation emphasize the methodology behind importing and exporting has to be in line with the overall target of market growth, lower unemployment and a well balanced Producer Price Index and a Consumer Price Index. Long-term planning is required because it take time to identify market opportunities, expand operational relationships with foreign partners, and achieve profitable transactions.

Participating in the international markets provides opportunities for countries to, generally, improve their competitiveness and to learn by exposure to other cultures and state of minds. By being involved, sell and procure internationally, a company can gain insights on customer needs and competitor activity. In today’s global economy it is inconceivable to be foreign to foreign markets. Also, by competing internationally, companies could obtain new technologies, and new ideas for products, as well as partnerships with local manufactures that can produce at lower cost at their own country.

Superior knowledge or specialty products can provide an edge and secure transactions. Going into the international market can improve a return on heavy investment and reduce initial high operating cost. Countries should look for multiple benefits from importing, such as long lasting relationships, long-term investments and ideal local sourcing to further drive the cost down.

Four key points that were emphasized in the simulation

• Free Trade Area - between countries lower trade barriers increase the volume of