REASONS AND ADVANTAGES OF INTERNATIONAL TRADE ON MALAYSIA’S ECONOMIC GROWTH

by Izzah, Aqilah, and Azimah

International trade is any legal exchange of goods and services between countries. International trade consists of export, import and entrepot activities. After signing a General Agreement on Tariffs (GATT) in 1957, Malaysia has become part of the multilateral trading system. In Malaysia, Ministry of International Trade and Industry (MITI) is a government institution responsible for managing the international trade between Malaysia with other countries.

Other than ASEAN countries, Malaysia has also conducted international trade with other countries such as China, USA, Japan and other countries which involve export and import activities of Malaysia and those countries. Based on first quarter of 2017 statistic, Malaysia's major export destination was Singapore at 14.70%, followed by China by 13.31% and followed by USA with 9.59%. While the main import source country of Malaysia is 19.51% of China, the second most populated country is Singapore with 10.80% and followed by USA with 8.65%.

International trade exists due to specialization in production in certain countries. This specialization occurs due to several factors such as the existence of natural gift factors, differences in size of capital ownership and population efficiency. Secondly, the size of capital owned by a country is different. There are countries that have a lot of capital in addition with the use of high technology (rich countries) and there are countries with little capital with the use of low technology (poor countries). The size of capital ownership and the use of these different technologies led to the creation of different techniques and types of production. , the difference in skills and labor competencies in a country has led to a specialization in which the international trade happened. Generally, developed countries have more skilled labor than the less developed countries. Besides that, differences in the people’s preferences also lead to the international trading. Residents of each country have different preferences. . For example, Malaysia imports Toyota brand cars from Japan because some Malaysian people prefer Japan’s than Malaysia’s brand.

First of all, every country is not gifted with same set of natural resources with all type of resources. For example, we are importing rice from Thailand because our rice is not enough for people in Malaysia. The availability of all type of goods also can be feel by all people in the country that doing international trade. It helps country by reducing their cost if cost of producing need a high cost, so they importing the product which needed only low cost. For example, Malaysian can enjoy themselves on eating apple and grapes even though in Malaysia they cannot produce it. Next, reduce unemployment for a country also can be the advantage for doing international trading. The Malaysia External Trade Development Corporation (MATRADE) that assist Malaysian exporters to develop and expand their export markets. MATRADE is creating a job for people. improves financial performance which the advantage of international trade. For the business or a firm that involved in foreign trade work causes increase their financial performance. This is because their consumer scope are not only in their country but in the rest of the world and they are expanding the market to a big size. International trade also encourages market competition. Through international trade, there must be many competitions that they market need to compete.