Applying International Trade Concepts
International trade has been around for much of history but with the technology advances and industrialization from the last few centuries, international trade has been on an increasing upward slope. Countries have discovered how to use what resource each one has to its optimal advantage. If a country specializes in a product that it produces most efficiently, then it can use that product to increase its wealth by trading. As with anything that affects the economy of a country, balance needs to be maintain in order for all countries involved to achieve what is best for them.
The main advantage to international trade is the gains of all the countries involved when the right countries are exporting the most beneficial product and importing the right product from the right country. A country that is equipped to handle a certain product will succeed in doing so much like Rodamia and its domestic production of cheese and DVD players.
From the choices that Rodamia had, these were the optimal products to produce themselves and export to neighboring countries. Rodamia still needed corn and watches so it decided to import corn from Uthania and watches from Suntize. This was in line with the opportunity costs of production for each country and proved to be the best decision. The opportunity costs of producing goods were different for each country so there was potential gain for Rodamia to specialize in cheese and DVD players. However, when those conditions changed, Rodamia's domestic industry could experience an efficiency loss.
Suntize started to price the watches it sent Rodamia lower than the watches sold in Suntize's domestic market. Inaccurate pricing, or dumping, can cause unstable international markets for a product and did in Rodamia's case. A market value had to be calculated and a...