International trade

International trade is the exchange of goods and services between countries. For example, you can find Australia’s beef, Brazilian coffee, Japanese wine in a supermarket. Nearly everything can be found on the international market. A product sells to an international market is called export while a purchased product from international market is called import. There are reasons that countries involve in international trade. For instance, some countries lack of raw materials like timber, rubber, oil or petroleum. Therefore, these countries must trade with Malaysia or other countries in order to get what they want. Its citizens are not able to produce the final goods like furniture if the country does not involve in international trade. In most countries, international trade represents a significant of gross domestic product (GDP). However, it can bring pros and cons to a country. International trade does benefit Malaysia because of the efficient allocation of resources due to specialization. International trade allows countries to utilize their own resources such as labor, capital or technology more efficiently. Countries are given different assets and natural resources. Thus, Malaysia concentrates on the production of electronic products, rubber and others as she has ample of them and can obtain these goods more cheaply. This will make the resources became more efficiently allocated and reduces their opportunity costs. It occurs when each nation specializes in production of certain goods according to its comparative advantage and trade with other nations. For instance, Malaysia and Indonesia can gain comparative advantage through trading timbers and rubbers with each other. Malaysia exports rubber to Indonesia while Indonesia will export timbers to Malaysia. As the land area of Malaysia is limited, Indonesia gains absolute advantage to specialize in exporting timbers because it has large land area to replant after cut down the trees. On the other hand,