Bilateral Economic Relations

Bilateral economic relations refer to the economic relations between two nations. In the current global economic scenario, countries can no longer afford to restrict economic activities within the home economy. With the growth or globalization and liberalization, countries find it advantageous to forge economic relations with other nations.

Bilateral economic relations play a strategic role in the growth and development of an economy. Some of the major benefits of bilateral economic relations are advantages of cost, economies of scale, and employment. Many countries across the globe have established strong bilateral economic relations with other countries.

Bilateral economic relations help developed nations to access the markets of developing countries. This is beneficial for the industries of the developed nations as they can penetrate the markets of various countries. Developing nations like India and China have also gained significantly from bilateral economic relations with other countries.

The biggest advantage for the developing nations from bilateral economic relations is in the form of employment generation. With the inflow of capital to these countries, economic activity is boosted resulting in the growth of the economy. In the case of undeveloped economies, bilateral economic relations help them to get economic aid and loans for development projects.

One of the major components of bilateral economic relations is bilateral trade. The trade of goods and services between two countries help both the participating countries to reap benefits by exporting goods and services which are produced in excess and importing those where there is a shortfall.

Bilateral trade brings don cost of production of those goods and services for which there is comparative disadvantage in an economy. In this era of globalization, many countries have opened up their economy to foster bilateral trade. Regulatory relaxations along with relaxations in import excise and customs play an important role in bilateral trade. Several bilateral trade agreements have been signed between nations.

Another import aspect of bilateral economic relations is FDI (Foreign Direct Investment). Inflow of foreign direct investments has proved to be beneficial for many developing economies. Many countries across the globe have undertaken liberalization policies to attract foreign direct investments into the economy.

This is also beneficial for investors since they can invest in countries from where they can get higher returns. Bilateral economic relations also help countries to get loans and economic aid from other countries during times of need. This is especially beneficial for developing and undeveloped countries.