International Trade has exerted a profound influence on the economic growth of a country. It has been observed that with the opening up of the economy and liberalisation of trade restrictions, the developing countries, especially India and China, have grown over the years.
International Trade has positively influenced the economic growth of a country in the following ways
International trade injects global competitiveness and hence the domestic business units tend to become very efficient being exposed international competition. Due to the integration with the world economy the entrepreneurs can have easy access to the technological innovations. They can utilize the latest technologies to enhance their productivity.
The developing countries have higher trade protectionism measures as compared to the developed countries. The countries that have adopted such measures are seen to reap the benefits of an open trade regime.
The products that are labour intensive like clothing, footwear, textiles etc are exported by the developing countries to both developed and underdeveloped countries. Such exports earn heavy tax revenue in countries like Mexico, India, China and many more.
International Trade has also brought in a reduction in the poverty level. India was a closed economy in the 1960s and 70s. There was not even 1% decline in the poverty level. The entire scenario changed with globalisation and international trade. According to Prof. Jagadish Bhagwati the reduction in the poverty level is due to a pull up rather than a trickle down effect. The economic growth brought about by international trade can generate financial resources. Such resources can be used to set up anti poverty programs . Better education and health facilities can also be provided to the poor.
The exclusion of all types of trade barriers in the agricultural products of the developed countries will lead to a decline and rise in production and world prices respectively. The developing countries profit by selling or exporting these products at escalated world prices.