Advantages & Disadvantages of Trading Partners

A trading partner of a country can be described as another country with which a country carries out its trade. Partnership may be restricted to countries following certain laws set aside by trading blocs within a region. Similarly, countries in the same region can carry out trade with one another if laws governing the trade bloc in which they belong state so. There are both advantages and disadvantages associated with trading partners.
  1. Acquisition of New Goods

    • An advantage of a trading partner is that it enables you to acquire goods that you do not produce as a country. For instance, Country A may produce coffee, while Country B may produce machinery. If these two nations trade, Country A is able to acquire mechanical products that it doesn't produce, while Country B is able to attain coffee, a product that it does not produce.

    Opens Way to Barter Trade

    • When you are carrying out trade with a trading partner, you can establish barter trade, due to the difference in production. The two trading partners can exchange goods they produce for goods they don't produce, rather than paying cash to get the goods from the other trading partner.

    Uneven Currency

    • A disadvantage of trading partners is the possible difference in currencies. When two trading partners have different currencies, the one with the lower currency value always bears most of the bulk of the trade. This is due to the large amount of cash output that nation will have to incur in order to obtain goods from the trading partner. The unevenness in currency also causes unequal volumes of trade.

    Volume-Oriented Barter Trade

    • Another disadvantage of a trading partnership is that it gives way to trade that is volume oriented. This can be seen in a case where barter trade is carried out between two trading partners. For instance, say Country A produces a cash crop, such as tea, and Country B produces heavy machinery, such as vehicles. In the process of trade between the two, Country A is likely to export much of her cash crop, while Country B will only chip in a small percentage of her machinery to settle the trade.

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