WHAT INTERNATIONAL ECONOMIC RELATIONS BRING
International economic relations have been executed in different ways for centuries. Vast majority of the international economic relations consisted of limited number of goods and services in the past.
International economic relations have been executed in different ways for centuries. Vast majority of the international economic relations consisted of limited number of goods and services in the past. For example, in the Mercantilist period (in the 16th and 17th centuries), movements of goods and small-scale capital movements took place in the foreign trade transactions. With the increase of production in extraordinary dimensions since the Industrial Revolution, technological advancements, possibility to conduct transportation in breathtaking speed, facilitation of communication means more than what could be imagined, the flow of goods and services between countries and regions along with the production factors like capital, labor, knowledge, and technology has increased gradually. This way, national economies are interconnected through the economic flows that are gradually becoming more and more complex and intense.
Today, there are goods and product groups that every country or a nation produces under more appropriate conditions due to various reasons but the requirements of a country or a national economy are outside such product groups. In this case, if they do not want to make use of foreign trade, it is necessary to give up some of the commodities produced under the most suitable conditions and move the production elements excluded from that field to another field that is in need of them. However, the thing that must be taken into account in such condition is this: has such a national economy that performs production for any commodity needed been able to acquire the maximum welfare with the means at hand? The answer for this would be manifestly “no.”
If a country sells the goods that it produces under the most suitable conditions to other countries and purchases the ones that it needs rather than trying to produce whatever it needs, then it has taken a step forward toward maximum welfare. In other words, countries must fulfill their requirements by exporting the goods that it needs to produce under inappropriate conditions and importing ones that it can produce under suitable conditions and it must not evaluate its investments within the same basket. That is to say, it must keep its portfolio basket rich. All the companies of the world now accept that it is in no way an intelligent thing to put all eggs into the same basket.
International economy scrutinizes which commodity that a country must specialize on and enter the foreign trade and how its foreign trade price must be on the basis of simple assumptions. These concepts constitute the scope of international trade.
The basic principle of the international economy policies can be expressed as the utilization of the opportunities provided by international expertise and cooperation in the largest possible manner.
International commercial activities are significantly different from and more complex than the domestic commercial activities as the national laws, political and economic systems and policies, moneys, languages, traditions, and markets are different. It may pose significant setbacks particularly in the comparison of the international trade.
While the science of economy keeps track of the development of the international economic relations and explains the scope, reasons, and impacts of such relations on one hand, it also includes the policies, instruments, and international integration attempts used for steering such relations, into its scope of scrutiny, research, and explanation, on the other.
It is necessary to say that in practice, the expression of “foreign trade” is used most of the time to express the foreign economic and financial relations. No doubt, such term narrows down the scope of the transactions because, as we stated above, the concept of foreign trade specifies the flows of the international commodities and services in a narrow sense and excludes the flows of factors like capital, technology, and labor from its scope. Such use can be because of a habit or in relation with the fact that foreign trade occupies the most important room in the economical relations for most of the countries. Hence, it is necessary to handle foreign economic relations in a broad sense.
Rapidly increasing technology and globalizing world have shown that the companies must now expand toward foreign trade and no right of life is granted to the introvert companies. The globalizing world economy has shown us that the companies suspending growth and not opening for improvement start their collapse.
Assit.Prof.Dr. MEHMET NACİ EFE