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What is International Trade?

The term "International Trade" is generally referred to the exchange of goods and services between countries. In many developing countries, this type of trade plays significant part in gross domestic product (GDP). Trading globally also provides growth to a world economy in which prices affected by international events.

Why do Countries Trade Globally?

Trading internationally provides opportunity to the countries to import goods and services which are not produced in their own countries. Nearly all type of products can be found in international market including apparel, auto parts, agricultural products, jewelry, furniture, consumer electronics and currencies. Different types of services are also traded across the international borders such as banking, tourism, consulting and transportation. A good which is sold in international market is called an export, and a good which is bought from international market is called an import. Exports and Imports are credited in a country's account in the balance of payments.

Advantages in International Trade

In this century global trade has increased the popularity due to lots of advantages it has provided to various countries around the world.
  • International trade allows bringing various varieties of merchandise from different countries. This provides customers wide range of choices which will help to improve their quality.
  • This will also help to increase the efficiency in production. A country will adopt better methods of manufacturing to keep costs cheap in order to remain competitive.
  • International trade also helps the countries to reduce their unemployment rates through the establishment of new industries to cater the demands of different products.
  • Countries utilize their resources better to produce high quality goods in which they have a self-sufficient.

Free Trade vs. Protectionism

These are the two complementary views of International Trade concerning the level of control placed on trade.

  • Free Trade: There is no restrictions apply on trade. It allows companies to trade frequently as a result in a greater exchange of products and services. Therefore, country does not need anything special to increase the trade and growth, because it will do automatically.
  • Protectionism: At the other end, protectionism holds the policies of government which are designed to decrease the market inefficiencies and provides fair competition between products and services. Protectionism exists in different forms such as tariffs, subsidies and quotas.

Posted by: Iris on Feb 08 2014

Tags: International Trade Basics Of Trade Import Export Global Trade Benefits Free Trade Zone

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