International Investment and Trade

People are talking about international investment and all the big player in that game. Have you ever wondered what does that actually entail? And what are the rules of investment schemes all over the world? What are the governing bodies that make them work?

Some of those questions will be answered here in this article and hopefully, you will have a better understanding of world trade, what exactly goes on in international institutions, and how does this all influence the prosperity of individual countries.

What is International Trade?

post5aThere are many theories in an economy that try and explain what are the principles behind international trade and why is it significant for the development of humankind. What can be abstracted, as a sort of general rule behind the complex trade systems is that countries substitute the lack of certain resources, products or services by trading with other countries?

That was the simplified version of the answer, the complete one will consider a lot of other factors that will influence the continuing makeup of the world trade system. Things like geographic distance and ideological similarities What market does the country have access to will be determined by its presence in international organizations, that have their own agendas? What this entails is that governments of countries have to work together to improve the markets abilities of their own countries and to bust their production and trade.

There is also one rule that addresses the type of product that sovereign countries trade with. Usually, less developed countries trade with raw resources as they do not have the industrial capacities to make products from those resources. More developed countries usually import more raw resources, but they also produce products and offer particular services that are in demand all over the world.

Why do countries invest in other countries?

post5bCountries that have a high level of export of any kind will have enough earnings to invest in less developed countries. And this is the principle that has found the most application in modern neo-liberal capitalism that has opened up the world to globalization.

This process has brought about the dismemberment of national companies and the production of international corporations that are taking over the world’s consumer market. This could not have been possible without international trade and investment. Less developed countries depend on the money they will get from the leading countries of the world because with it they will develop their own production capacities. The country that is investing will have products that are on demand in their country and they will have a low wage workforce. That will cut down the cost of production and create more opportunities for money to flow through the market.

The other part of the international investment is political. Because developed countries usually have sets of rules that they demand from less developed countries to fulfill. Those rules are usually associated with law and general issues linked with the organization and governance of the state.