International Trade and Globalisation
International trade is the exchange of goods and services across borders. Globalisation is the increasing interconnectedness of economies, cultures, and societies worldwide.
Comparative Advantage
Absolute advantage: producing more with the same resources. Comparative advantage (Ricardo): specialising in goods with lower opportunity cost. Trade benefits all countries when each specialises according to comparative advantage, even if one is more productive in everything.
Trade Policy
Free trade removes barriers for maximum efficiency. Protectionism uses barriers to shield domestic industries. Tools: tariffs (taxes on imports), quotas (quantity limits), subsidies (government support to domestic producers), and non-tariff barriers (regulations, standards).
Balance of Payments
The BOP records all international transactions. Current account: trade in goods/services, income, transfers (remittances). Capital account: investment flows. Nepal runs a current account deficit offset by large remittance inflows. Exchange rates adjust to balance payments.
WTO and Trade Agreements
The World Trade Organization promotes free trade through multilateral negotiations and dispute resolution. Regional agreements: SAFTA (South Asian Free Trade Area), BIMSTEC. Nepal joined WTO in 2004. Trade liberalisation creates winners and losers within countries.
Globalisation
Globalisation integrates markets through trade, investment, technology, and migration. Benefits: economic growth, technology transfer, consumer choice. Challenges: inequality, job displacement, cultural homogenisation, environmental degradation. The digital economy accelerates globalisation.
IT and Global Trade
IT enables global value chains, outsourcing (BPO, KPO), digital services trade, remote work, and e-commerce across borders. Nepal's IT sector participates through software development, data processing, and digital freelancing.
Summary
International trade based on comparative advantage increases global welfare. Understanding trade policy, globalisation, and IT's role in global commerce is essential for modern economic literacy.