Business among and between Nations of the world has grown significantly in the 21st century. There has been a remarkable increase in the exchange of goods and services across international borders. A question may arise as to why countries trade. Mostly, when local/domestic markets become matured or fully developed, the volume of sales reduces or slows down thereby making companies to explore opportunities of doing business in/with other countries. Global trade is important to a country and the businesses in that country as it creates opportunities for the economy to grow through provision of a market for its products, services and accessibility to the needed resources. Companies are thus availed opportunities to expand their business outside their countries and increase their productivity as well as developing world-class distribution channels/systems. Further, there is reduced dependency on the economies of their own countries.
A numbers of factors influence decisions to trade globally such as price, availability, capital, natural resources, quality of labor, innovation in entrepreneurship and technological advancements. These make up the basic factors of production in a foreign/overseas/distant/outside country. Global trade allows companies to broaden or spread their risk due to the fact that different countries may or are usually at different stages of economic cycles or development stages.
A limited number of countries/nations can effectively and efficiently produce ALL the goods and services their populations or people need. Absolute and Comparative Advantage come to play as a result of that. Global trade provides countries with a means to meet demand in their country.
A country has an Absolute Advantage in making a product for which it can maintain a monopoly or that it can produce at a lower cost compared to any other competition or country. It is worth noting that this type of Advantage (Absolute) is rare in most countries in the 21st century. However, some countries or nations do have to some great extent a better management of the absolute advantage in some products such as oil. This being the case and due to the fact that geographically, majority of the oil deposits are in the Middle East countries, the countries in this location with oil deposits have more control over oil products and this can sometimes create an opportunity to overprice to make more money.
A Country has a Comparative Advantage in a product if it can supply it more efficiently and at a lower price than it can supply other goods compared to the outputs of other countries. China is one such example of a country in the production of furniture and Japan in electronics though countries such as South Korea, China and Taiwan are closing in on Japan in my opinion.
Coming to my home country Zambia, the nation does have some comparative advantage in some agricultural products such as Maize, Wheat and Soya Beans. Much as these commodities/products can not compete fully on the global market, within the region, especially Southern Africa, Zambia does have Comparative Advantage in these commodities.
