In theory, no one can dispute the advantages of international trade. But, in practice, the other side of the picture cannot be ignored.
Some countries, especially those which are at a lower stage of industrial development, have had a bitter experience of international trade.
The disadvantages are:
(i) The worst effect of foreign trade on backward countries is the destruction of their handicrafts and cottage industries. In India such industries had reached a high stage of perfection. But the flood of cheap British manufactures swept them before it. In recent times, Japan tried to crush our cotton industry by flooding Indian markets with cheap goods and protection had to be granted to save it. Industrially weak countries have to suffer like this.
(ii) The empire-builder follows the trader. The foothold gained by traders is used to complete a country’s political slavery. For example, the British came to India for trade and stayed to rule. A powerful country can easily find some excuse for attacking a weak country.
(iii) Dependence on foreign goods creates difficulties in time of war when the country is cut off by enemy action. India had to face great trouble in getting ordinary articles like needles, tools and medicines during the war.
(iv) Extreme specialization which makes a country depend on one or two industries only is bad. This is like putting all one’s eggs in one basket. If a substitute is discovered or the industry otherwise suffers, the economic life of the people would be endangered.
(v) Countries which sell primary commodities and buy manufactured goods in return are losers. The standard of living of the people in such countries remains low. And the pity is that this state of affairs tends no persist. Foreign trade under such conditions leads more to discontent and unrest than to peace and goodwill. It is well known that the feelings of the Indian people for the British before they left India were very bitter
(vi) Foreign trade may completely exhaust a country’s natural resources like coal and oil which are irreplaceable. These goods are exported for the sake of profit. But the country suffers in the long run when their source is dried up completely.
(vii) Imports of harmful drugs and luxuries, as opium in China, ruin the health of the nation. For the use of such harmful articles, the blame must be put on international trade which brings them into the country.
(viii) Through foreign trade, the economic troubles of one country are transmitted to others. The economic disturbances in one country are transmitted to others and their economy is upset. For example, the collapse of American markets in 1929 resulted in a world-wide depression.
(ix) Trade rivalry leads to war and friction. Germany’s desire to secure markets for her goods was the most important cause of the last two World Wars. Commercial competition often strains relations. Nearer home, India and Pakistan find it difficult to come to an understanding due, to some extent, to a clash of trade interest.