There is no country in the world that can meet domestic needs without cooperating with other countries. Countries must carry out international trade cooperation, one of which is bilateral trade relations.

What is bilateral trading?

Basically, no country is able to meet all the needs of its own population. This is what triggers a country to carry out trade cooperation with other countries or what is commonly called international trade. International trade is carried out to meet a country's need for goods or services that cannot be produced domestically due to certain factors. In terms of understanding, international trade is a trade activity carried out by one country with another on the basis of mutual agreement. The form of international trade itself is divided into three, namely bilateral trade, multilateral trade, and regional trade. Well, the definition of bilateral trade is international trade that is only carried out by two countries. As the name is bilateral with the syllable bi which means two, as long as there are two countries participating in trade, then the trade is included in bilateral trade. Usually the two countries will agree on a trade agreement or other cooperation to achieve something. Examples of bilateral trade are Indonesia's cooperation with Japan, or Indonesia's cooperation with Malaysia.

Why does a country engage in bilateral trade?

There are two driving factors that cause a country to conduct bilateral trade, here are the explanations.

1. Economic freedom 

With economic freedom, it creates an opportunity to increase the wealth of a country. The existence of buying and selling transactions between countries increases the country's foreign exchange. Economic freedom is able to encourage all producers to improve the quality of goods to compete in the international market. Each country has trade rules, but economic freedom makes interaction between countries easier and encourages increased international trade through bilateral cooperation. 

2. Differences in the wealth of natural resources 

The natural conditions in each country are quite different. This makes a country have to interact with other countries to meet the needs of its country. Therefore, international cooperation is needed in the form of bilateral trade. The reason is that it is rare for a country to be able to meet all its own needs.

What are the benefits if a country conducts bilateral trade?

International trade activities have actually been running since thousands of years BC. Along with the development of communication and transportation technology, trade activities between countries have become smoother. Therefore, currently international trade is an important aspect in the economic growth of every country. Many countries take advantage of international trade, including bilateral trade, to increase Gross Domestic Product (GDP). The last term refers to the total production value of goods and services of a country. Increasing the value of GDP is one of the indicators of a country's economic growth. The following are the benefits that can be obtained by each country that cooperates in bilateral international trade. 

1. The formation of friendly relations between countries 

Trade between countries is also useful for forming friendly relations with other countries. If relations between countries go well, it is likely that cooperation between the two countries will expand to many sectors and is not limited to trade. The cooperation can also penetrate other fields such as culture, politics, education, military, and technology. 

2. Creating efficiency and specialization 

The ongoing bilateral trade will make one country specialize in one economic sector. In a sense, the country and its population will have special expertise that is different from other countries in producing goods and services. 

3. Increasing the country's prosperity 

Indicators of a country's prosperity can be seen from the activities of economic actors including producers, consumers, and the government. With bilateral trade activities, it will bring prosperity to every economic actor. Producers will experience prosperity if they can increase their profits by increasing the sales of goods or services to various countries with few tariff or non-tariff barriers. As for consumers, they will experience prosperity if they are able to increase utility by increasing consumption without being hindered by difficulties in obtaining goods or services that are not produced in their country. The government also benefits if it conducts international trade because the country's source of foreign exchange income will increase if the export value is higher. 

4. Reduced unemployment

If the foreign trade market is expanding, the production of goods or services in a country will also increase. Because of this, the need for labor has also increased in various sectors. If that happens, the unemployment rate will also decrease by itself.

5. Science and Technology Transfer (IPTEK) 

Bilateral international trade also plays a role as a tool for mobilizing science and technology, especially from a developed country to a developing country. Bilateral trade will allow a country to export goods based on technological sophistication such as modern machinery and tools to countries that need it more. Thus, the mobilization of technology in the importing country will be faster.

6. Stabilizing prices 

Bilateral trade can also indirectly control prices in a country's domestic market. With bilateral trade, the scarcity of goods that result in high prices can be overcome through imports to increase stocks in the domestic market. On the other hand, if the country has excess stock that causes the price of goods to be cheap, then export activities can be carried out to reduce goods. 

Is there a negative impact of bilateral trade for a country? 

Although bilateral trade cooperation brings many benefits to the countries involved, this economic activity can also have a negative impact. Some of the negative impacts of bilateral trade are as follows. 

1. Domestic products are declining

The existence of bilateral trade will also cause industrial competition between countries. If the industry in a country has a low quality of production of goods and relatively expensive prices compared to other countries, then the country will experience a decrease in the number of demands. This is because consumers tend to look for goods with good quality and affordable prices.

2. Dependence on developed countries

In terms of goods production, developing and poor countries have a fairly high dependence on developed countries in production factors, especially those related to technology. Meanwhile, in terms of goods consumption, the development of electronic goods and automotive goods is increasingly controlled by developed countries. As a result, the majority of poor and developing countries are still consumers only.

3. Small industries struggle to compete

Limited capital is often an obstacle for small industries to develop themselves. Bilateral trade activities have the potential to further limit the movement of small industries because they have to compete with national and multinational industries that have larger capital.

4. Unfair competition 

The move of a country's government to win the competition in international trade, by making a number of policies such as dumping and import tariff practices, is inappropriate. This strategy undermines the essence of international trade which should be based on the principle of healthy business competition.

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