Exports and imports
International trade is the buying and selling of goods and services across national borders. Exports are goods and services sold to other countries; imports are those bought from other countries. Malaysia exports palm oil, petroleum, rubber and electronics, and imports machinery, certain foods and raw materials.
Why do countries trade?
- Specialisation — each country concentrates on producing what it makes most efficiently, then trades for the rest.
- Comparative advantage — a country trades goods it can produce at a lower opportunity cost than others.
- Natural resources, climate and skills differ between countries, so no country can produce everything efficiently.
- Consumer demand for a wider variety of cheaper goods also drives trade.
Example
Malaysia is efficient at producing palm oil, while Japan is efficient at making cars. Malaysia exports palm oil and imports cars — both countries gain.
Visible and invisible trade
Visible trade involves physical goods you can see, such as palm oil and electronics. Invisible trade involves services, such as tourism, transport and banking.
Protectionism
Protectionism is a policy of protecting domestic producers from foreign competitors. Two main tools are tariffs (a tax on imports that raises their price) and quotas (a limit on the quantity of goods that may be imported). Its aims include protecting infant industries, safeguarding local jobs, and reducing dependence on foreign goods. However, if taken too far, protectionism can raise prices for consumers and invite retaliation from other countries.
Benefits of trade to Malaysia
International trade matters greatly to Malaysia's open economy. It opens wider markets for exports such as palm oil and electronics, earns foreign exchange, lets the country obtain goods it cannot produce itself, and lowers prices through competition. Trade also encourages the transfer of technology and creates jobs in export-oriented industries.
Remember
International trade gives Malaysia wider markets, foreign-exchange earnings, goods it cannot produce itself, and lower prices through competition.