Japan's International Trade

Countries engage in international trade because it is a mutually beneficial process. At the macro level, national welfare increases. At the micro level, individual exporters earn profits, provide an additional level of employment, and supply convertible foreign exchange which is used to pay for imported goods and services.

In terms of national welfare and economic common sense, imports are the ultimate rationale for trade. By definition, a good is not likely to be imported unless it meets at least one of three criteria: (1) it is cheaper than domestically produced counterparts; (2) it is of better quality than its domestic competition; or (3) it is either unavailable or in short supply in the domestic market.

Obtaining goods from abroad at cheaper prices increases consumer's buying power, and, as a consequence, real incomes rise. This in turn means an increased standard of living in the importing country. High tariffs and other barriers to imports increase costs to consumers, lower real incomes, and reduce their freedom at the marketplace. One of the major sources of price disciplines and incentives for innovation by domestic industry is import competition. Imports are intrinsically deflationary. Furthermore,

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economists, promulgate trade policy. Visions of economic efficiency are subordinated to the domestic priorities of national security, full employment, etc. The overriding international economic dilemma for national governments in today's sophisticated, interdependent world economy is how far to go in liberalizing the various barriers and distortions to world commerce that have been erected. International trade follows various patterns. The first major trade pattern, described by David Ricardo, was called the law of comparative advantage. This is one of the most important and still unchallenged laws of economics, with many practical applications. According to the law of comparative advantage, even if one nation is less efficient than another nation in the production of two commodities, there is still a basis for mutually beneficial trade. The first nation should specialize in the production of and export the commodity in which its absolute disadvantage is smaller (this is the commodity of its comparative advantage), and import the commodity in which its absolute disadvantage is greater (this is the commodity of its comparative disadvantage). Building on this concept, Rybczynski developed his theorem which postulates that
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Approximate Word count = 1566
Approximate Pages = 6 (250 words per page)

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