Trading : Boycott & Self-Reliance? Two facets of the coin

Imagine yourself manufacturing your own watches, cars, apparels, medicines, mobile phones etc., even growing crops to feed yourselves, farming to create agricultural products that you use everyday, Impossible, right?

That is why trade was invented.

With current trending and modern day requirements, trading has become integral part of our lives. We depend too much on products produced by manufacturers that mass produce them.
This is main reason we cannot completely boycott products which are part of our day to day life and dependent on. Modern economies are built on top of the foundation of easing lives by trade.

# Why we need trade?

Trading simplifies things and allows people to produce more complex products and distribute among consumers in a way that does not require manufacturing expertise and years to research. Trade essentially allows people to exchange their produces that they are good at manufacturing. Sometimes produce is dependent on certain craftsmanship, some intellectual property or expertise or even on geographic location. Various factors affects the trade and there are two main economic factors.

These two major economic reasons are:

1. Opportunity cost: no region or country could ever be self-sufficient and most efficient in producing as well as selling. Opportunity cost is the cost of availing one opportunity over other. Quite literal!
2. Comparative advantage: it is about leveraging the opportunity cost. One country can produce good A more efficiently and cost effectively while other country produces good B. They can enter into a trade agreement with each other and become mutually efficient. Plus, the countries collectively can serve as a larger market than a single country alone.

# Areas

When thinking about trade, it raises a question which thing we use from where? You may be reading this story on a mobile device which is engineered in USA and manufactured in China, When using a laptop whose technology is probably from Korea, OS from America, it’s plastic body  made from oil in Oman drilled by Indian labourers, semiconductor chips and many other technology things from various country. If any country seeks to be self-sufficient, the cost of good produced may increase by as much as hundred folds. Imagine buying a plastic bottle for 5000 Rupees.

# China leads in exports, why?

It has ports, everywhere! 34 major ports and 2000 minor across the globe. They are willing to pay high social and environmental costs involved in this vertical development. And hence, they can have their factories multiplied like mushrooms.

In 1960’s, the Chinese decided to be an export led economy, unlike India which chose to globalize and liberalize their economy due to situations, way behind other nations.

#Recommendations for any Exporter

Indian exporters are not availing optimum incentives, due to poor schemes and/or lack of awareness. Many manufacturers and exporters lack basic knowledge base to turn their businesses into exporting businesses. We can consultant help such business grow and provide ways to monetize their goods & produces at effective rates and further optimize it to take trade benefits that modern economy offers.

# What you can do as exporter?

We can take cues from Vietnam about expanding our horizon on trade. Vietnam has entered into FTA with EU to become a seller of raw materials for them. Similarly, we can foster trade by educating and incentivize our exporters. India has highly skilled labourer who are currently support systems of foreign companies. Example – Indian industries can be encouraged to manufacture apparels and come with a brand of international standards.

We have already covered about such FTA in previous article, so do not forget to check the article – Paying Zero Custom Duties! Learn How?