International Economy and Finance – Trading and Transactions in Global Market

International Economy and Finance – Trading and Transactions in Global Market

Trading is the act of exchanging good and services between two or more parties. The transactions are done with an aim of a return. In the current global market, transaction takes place at a faster rate owing to the introduction of improved technology. Trade can be internal or external. However, the attributes of any trading activity among the nations have contributed to general development. There has been integration of favorable policies favoring international trades.[1] Nations are entering into treaties to strengthen their relationship with the common objective of expanding their market coverage. One question that we need to ask ourselves is whether trading within and outside country brings a sense of equality? Politicians are at the center role in making policies that regulate any operations in a country. In most instances, those commercial policies are implemented but the expected economic growth derails significantly.

Moreover, global summits involving multiple nations do not reflect the true agreement which are arrived at. The coalition of third world countries with the developed ones seem suspicious. This is because irrespective of heavy funding and investment in developing nations, their economy continues to lag behind. They continue to remain subordinate to the top nations since decade. Robinson argues that the international trade is aimed to maintain the suppression on the third war countries. Foreign trade has mixed reactions in respective countries.[2] The changing macroeconomic trend have a significant impact on the development of a nation. He further notes that internal interests of the wealthy and politicians in a country subdue the less fortunate. In other words, trading has turned out to be a self-development agenda. Instead of constituting the entire population to benefit from the process, only selected individual enjoy at expense of others.

Developing nations are drawn into capitalist form of market by the superiors in the market. Most of the third world nations have been known historically for producing raw materials for industrial manufacturing. They have been in the center stage of supplying quality raw materials to the developed nations and the final products are sent back at higher prices. For example, Africa mining ores are controlled by oversea corporations who manage considerable amount of share.[3]They train the local and employ them at poor salaries. The mineral ores are managed by expatriates who receive orderes from oversea headquarters. This indicate that the local government has no power to dictate the operations conducted by such organizations. Since the host economy is not developed enough to explore mineral, they remain under control of certain individuals who have monetary muzzles.

Tax collection becomes complicated since valuation of natural resources is not quantifiable. In order to remain loyal to the corporation conducting the mining and any other investment plan, government is duped to agree randomly on revenue collection. When a corporation has operated in varied activities, the returns could be manipulated. This is mostly witnessed leaving the host country poorer instead of alleviating the poverty. The ability of the corporation to negotiate with the government and relative economic power are aspects considered in determining what a foreign corporation contribute.

Consequently, there is danger on continued reliance on primary exports for any country. Instability is one condition that renders the market unpredictable.[4] If a nation only exports agricultural products, this could necessitate more problems in case the crops fail to grow. They settle on imports to cater for the growing population from the developed countries. It is worth noting that rich nations protect their citizens in the trading patterns. The cost is hiked for any country that enters into trade with them. Subsequently, the imports are charged heavily compared to the returns which the developing nations receive from their exports. Instability is classified into different levels. It can appear due to changes in technology, price changes and shift of consumer habit.

Withal, monopoly power within the country has a significant implication on the terms of trade. Unfavorable market is introduced where only one entity controls the market. A good example is rapid rise of oil prices in the year 1973.[5] The situation fuelled malpractices among the various distributors, who controlled the industry by then. A group of traders were able to manipulate the economic laws to benefit themselves. The incident resulted to exorbitant prices for fuel products. Starters in the oil industry were blocked to enter the market, since the prices were fabricated to suit the increased demand. Local traders made more than they could have made by exporting the product. Concatenation of happenings sometimes favor the swift in the market. In a free and fair trading environment, the prices are expected stabilize and allow any player to enter and exit.[6] Monopoly form of business is rigid and only a few people enjoy huge profits.

The purchasing power is determined by level of inflation in the country. As the trading continues to grow and expand in various forms, challenges are also evolving. The magnitude of inflation has a correlation to the prices of goods and services. For example, the prices of primary products in industrialized nations is lowering. It is estimated that the cost of operations in industrialized countries is becoming sophisticated hence the need to lower the cost of procuring raw materials. The cost of primary products oscillate on the basis of demand and supply. This suggest that the state of the nation’s economy dictates the prices of this products. It becomes unpredictable to ascertain the possible behavior of the economic environment. Economist have tried to put across various theories to predict performance. Irrespective of such moves, trading on different products leaves either one party disadvantaged than the other. Inequality in the market continues to haunt the various traders, who fight for their space.[7] There is urgent need of reforms to favor the small business people who have little command. Terms of trade targets the seller, who is weak in terms of funds and disorganized. The manufacturers who in this case are buyers have finance power to set the prices.

Trading is paramount and there is no nation that can progress without embracing it. Either internal or external, proper commercial policies are needed to avert the inequality cases that arises. The paper identify factors such as inflation, monopoly, terms of trade and economic stability as main contributors to the inequality in various nations. Although returns from exports serve a significant role in development, the seller is manipulated to settle on lower prices to benefit the buyer. This justifies the idea that the rich continues to be rich. In this instance, the producer is subdued by the manufacture through poor prices.

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