International trade economic transactions that are made between countries. This trade allows countries to expand their market for both goods and services that otherwise may not have been available domestically. The market contains greater competition and therefore more competitive prices. Among the items commonly traded are consumer goods such as television sets and clothing, capital goods, such as machinery and raw materials and food.other transactions involve services and payments for foreign patents.
Its visible trade refers to the buying and selling of goods solid tangible things between countries invisible trade, on the other hand, refer to service. Most economists globally agree that international trade helps boost nation wealth. When a person or company purchase a cheaper product or service from another country living standards in both nations rise. International trade and the accompanying financial transactions are generally conducted for the purpose of proving a nation with commodities it lacks in exchange for those that it produces in abundance. Such transactions functioning with other economic policies tend to improve the standard of a nation of living.
Classification of global trade :
There are three types of global trade. They are :
- Import trade
- Export trade
- Entrepot trade
The term import is derived from the conceptual meaning to bring in the goods and services into the port of a country. The buyer of such goods and services is referred to as an “importer“.
There are two types of import:
a. Industrial and consumer goods
b. Intermediate goods and services
Advantages of import
- Reduce dependence on existing markets
- Exploit international trade technology
- Extend sales potential of existing products
- Maintain cost competitiveness.
Disadvantages of import
- The importation of items from other countries can increase the risk of getting them which is no more common in the warm weather.
- It leads to excessive competition
- It also increases the risks of other diseases from which the country is exporting the goods.
The Smoot-Hawley Tariff, implemented in 1930 to protect U.S. farmers from European agricultural imports, is an excellent illustration of the import tariff. The tariff raised import taxes aimed at protecting American farmers against rising European goods imports.
The term export is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an exporter who is based in the country of export. In international trade exports refer to selling goods and services produce in the home country to other markets exporting is usually the first mode of foreign entry by companies.
There are two types of exports
a. Direct export
b. Indirect export
Advantages of Export
- Exporting is one way of increasing your sales potential
- Increasing sales and profits.
- Reducing risk and balancing growth
- Sell Excess Production Capacity
- Gain New Knowledge and Experience
Disadvantages of Export:
- Extra Costs
- Financial Risk
- Exports Licenses and Documents
- Market Information
For instance, between January and August 20185, the united states imported $1.68 trillion in goods. It exported $1.12 trillion in goods over the same period. That developed a $565.6 billion deficit.
Entrepot trade: A kind of external trade in which goods are exported with an intention of re-exporting it further with or without any additional processing or repacking.
Characteristic of global trade:
- The main reason for international trade is geographical specialization.
- Many country producers compete to sell their products. Therefore, international trade is subject to heavy competition. Here, quality, design, packing, price, advertisement, etc. all play an important role in deciding the market winner.
- Sellers and buyers belong to various nations in international trade. They may never have an opportunity to meet each other. They must, therefore, depend on middlemen for transactions.
- The international trade procedure is very lengthy and complicated. Buyers and sellers find it very hard to perform all the formalities themselves. They involve specialist middlemen such as, independent houses, shipping agents, clearing agents, foreign currency banks, etc.
- Importing and exporting countries‘ currencies are usually different… They generally choose dollar and pound sterling.
- Every country’s government exercises national control over imports and exports.
Features of international trade:
- India will export tea, jute, cloth, iron, and leather before independence. But after independence, they are exporting gems, jewelry, electronic goods, and ready-made garments, etc.
- But after independence petroleum, steel, industrial raw material, etc.
- India has depended upon foreign trade with foreign shipping, insurance, and banking companies. But when cargo ships were built-in India. Bank and insurance companies have started taking interest in foreign trade.
- India has a very less foreign trade relationship because they export through the sea route.
- In 1950-51 the imports were only 1.8% and exports were 2% all over the world. After independence, India’s total share of imports was 1% and through all over the world exports was 0.8%.
- The value and volume of imports and exports augmented several folds. In 1950-51 imports were Rs. 608 crores and exports were Rs. 606 crores. Thus the total worth was Rs. 1214 crores. In 2003-04, it augmented to Rs. 6, 52,475 crore. Worth of exports two, 93,367 large integers and imports three, 59,108 crores.
Advantages and disadvantages of international trade:
- Exporting companies can achieve growth rates that may not be possible if they concentrate only on their national markets. This provides an opportunity for brands and companies to achieve continuous revenue from a diversified client portfolio in multiple industries rather than a restricted client base in a single home market.
- International trade is helping each nation make the best use of its natural resources. Each nation can focus on manufacturing those products that are best suited to its resources. It prevents resource waste.
- Brands and companies can improve their financial performance by showing themselves in foreign trade work. This allows them to increase the returns they make on their R&D investment. The commercial lifespan of each chance can be enhanced by rotating the products or services across the global market, increasing what current products and services can provide.
- It enables a nation to acquire products it is unable to manufacture or that it does not generate owing to greater expenses by importing at lower costs from other nations.
- Goods are manufactured not only for local consumption but also for export to other countries due to international trade. The world’s nations can dispose of the global markets of products they have in excess. This leads to large-scale production and all countries across the globe can obtain the advantages of large-scale production.
- The highest means of transportation and communication are required for international trade. Development in the means of transport and communication is also made possible for the benefits of international trade.
- Natural calamities such as drought, floods, famine, earthquakes, etc. adversely impact a country’s output. Imports from other nations can meet the deficiency in the supply of products at the moment of such natural disasters.
Disadvantages of international trade:
- If you were a TPP brand and company, then Donald Trump’s words constitute a high political risk. Different countries are posing their own political risks at different levels, while national politics is changing over time and presenting an ongoing challenge. A government can alter laws in a discriminatory way or generate regulations that have a direct effect on a particular organization
- International trade has a negative impact on domestic industry growth. It presents a danger to home-based industries’ survival. The upcoming sectors in the nation may collapse due to foreign competition and unrestricted imports.
- For their economic development, the underdeveloped countries must rely on the complex ones. Such dependence often leads to exploitation of the economy. For instance, European nations have utilized most of the underdeveloped countries in Africa and Asia.
- Excessive exports can exhaust a country’s natural resources in a shorter period of time than they would otherwise have been. In the long run, this will trigger the country’s financial decline. Importing spurious drugs, luxury items. etc has an adverse effect on people’s economy and well-being.
- Sometimes in a country and in short supply. India, for example, was exporting sugar to gain foreign trade exchange hence the country’s exalting sugar prices.
- Many hardships may follow during wars or when excellent relations between nations do not prevail.
Needs if international trade:
- Nowadays the global economy depends upon international trade. Its main role for the development.
In other words, the motivation of trade is secure and an advantage for accrues of our country.
- If a country not enough any resources or capacity of their domestic demand. Then we importing our domestic resources to produce what they need. This is the main reasons for good and services
cost If the foreign countries in producing well with cheaply,
- Then it is beneficial to go to foreign trade. We have to produce a good quality of goods and services in international trade.
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