Economies that prohibit international trade struggle economically 

By Petrus Haikela Hanghuwo /

Countries depend on each other for many economic reasons just as no human being is independent on his own.

This is because some countries have distinct natural economic resources, while others have industries which consist of distinguished companies that produce valuable goods using economic resources of other countries such as entrepreneurial expertise, capital, land, labour resources and the like.

While these are main economic resources, they are not all present in every country. For example, some countries have mineral resources which are resources of land, but they might not have the industries that process such minerals; therefore, international trade is the key that unlocks the economic potential of all that fall in this situation.

Unfortunately while some countries might have natural economic resources, and still lack the companies to manufacture and process the resources such as minerals, they might restrict trade with other countries for political reasons.

International trade exist because of many known reasons, but most of all, the terms of comparative and absolute advantage that exist between economies cause international trade (when countries, across the globe, do business with one another).

However, this trade can only exist between any countries if they agree to trade. This trade can also exist as a result of imports and exports, when countries sell their production in foreign markets or buy from foreign markets. They buy and sell to other countries.

Nonetheless, economies mostly benefit from multinational companies and these are the economies that allow foreign companies to enter the indigenous market.

It is therefore an unfortunate moment for the economies that reject to trade with other countries especially when there are no local manufacturing industries that can manufacture and process raw materials.

Developing countries tend to be the most ones that engage in this practice, forgetting to think critically and economically about the advantages of trading with other countries. It creates benefits for both sides when there are better economic ties between nations; and social support is enhanced by the economic relationship that countries are having.

It also helps other countries to cope in times of difficulties (recession), i.e. moments like the current world wide threat of Covid-19. Countries are helping other countries especially developed countries are helping developing countries to respond to the pandemic.

If we link this to the topic, we can say that if there was no trade between developed countries and developing countries, developing countries such as Namibia, Angola, Zambia, etc., would not have received help from developed countries in the form of the Covid-19 vaccine. It is all international trade that tempts and encourage developed nations like China to assist African countries in such way.

The law of absolute advantage vs. comparative advantage in international trade dictates that: if two or more countries produce similar products but one country produces at a lower cost which allows it to sell at lower price, then other countries will let that country to produce that product, with the other countries having to buy the product from the producing country at the lower price.

That is to say, Namibia can also produce oranges like South Africa does, but because oranges are expensive to grow in Namibia and cheaper in South Africa, they are grown in South Africa and Namibia is happy to import oranges from South Africa.

This allows trade between these two countries to occur, and if Namibia for example produces wool at a lower price than South Africa, wool will be produced in Namibia and exported to South Africa.

In the end South Africa will export oranges to the Namibian market and Namibia will export wool to the South African market. This means these two countries are saving on production cost for each other.

International trade also exists when minerals such as diamonds are exported raw to developed countries for processing and the finished products will be sold back to the country of origin.

— Petrus Haikela Hanghuwo is a young graduate of the University of Namibia, specialised in business and economic teaching.