The Gains from Trade

The earnings from each country’s trade depends on the international price level in the ongoing international trade balance. As individuals, we benefit from receiving high prices for the products we sell and paying low prices for the products we buy. A similar principle applies to countries. A country gains more from trade if it receives a higher price for its exports compared to the price that it pays for its imports. For each country, trade gains depend on the country’s international terms of trade, which are the price the country receives from foreign buyers for its export products, relative to the price that the country pays foreign sellers for its import products (Pugel, 2015, p. 59).