International Trade

International Trade is the exchange of capital, goods and services between two countries. Certain countries produce more than what they require for their own internal consumption. Steppe and Prairie Plain regions in USA, Canada and Russia have a surplus production of wheat. The Middle East countries have surplus production of oil and the temperate forests have surplus forest products. Such surplus areas send their commodities to the countries having a demand for such products. Thus temperate wheat is send in many tropical countries of the world. Oil from the Middle East countries is sent to oil-deficit countries like Japan, India. Paper pulp is sent from Canada to European and Asian countries.

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Since, historical times, Kashmiri woolen shawls and carpets, from North India, spices and silk from South India and Chinaware from China were sent in the world market. At that time, international trade was carried out between different countries along the land routes. It was restricted only to the commodities which were light in weight and valuable. Due to modern means of water transport, fastest air cargo, growing production of agricultural commodities, minerals, manufactured goods, the modern international trade has grown to such a scale that it has become the base of the world economies. Economy of certain countries is entirely dependent on their exports. Economy of Middle East countries is based on their export of oil. On the other hand, industrial economy of Japan is dependent on the import of raw materials and export of manufactured goods.

The USA, Canada, Western Europe, Russia, Japan, South Korea and Australia are the leading countries with an advanced industrial economy. Diverse manufacturing industries are the basis of economy of these countries. These countries maintain their supremacy in manufacturing through researches and developing new technologies. The economy of the agricultural countries is dominated by commercial or subsistence agriculture. USA, Canada, Australia, Russia have a dominantly commercial agriculture, while China, India, south Asia have a dominantly subsistence type agriculture. Countries having commercial agriculture export their surplus production, while countries having subsistence agriculture consume most of their production locally.

Population plays an important role in the development of trade. Countries with a huge population such as China, India, Bangladesh etc, consume most of their production locally, and very little is left for export trade. On the other hand, less populated countries like Australia, Canada, Argentina, Russia etc. are able to export a big quantity of their production. The industrial countries have higher standards of living, promotes international trade. 

Industrialization, advanced transportation, globalization, multinational corporations, and outsourcing are all having a major impact on the international trade system. Increasing international trade is crucial to the continuance of globalization. Without international trade, nations would be limited to the goods and services produced within their own borders. International commodities are more costly than domestic trade because of long distance, tariffs, time costs, border delays etc.

Balance of trade 

In any type of exchange, the goods which are sold out of the country are the exports. The goods which are purchased from other countries are the imports. The volume of exports and imports determine the Balance of Trade. Balance of trade is the difference between the monetary value of exports and imports of output in an economy over a certain period. It is the relationship between a nation's imports and exports. It is of three types,

a. When the value of imports is more than the value of the exports, it is known as negative balance of trade. A negative balance is referred to as a trade deficit.

b. When the value of exports is more than that of its imports, it is known as positive balance of trade. A positive balance is known as a trade surplus.

c. Balanced trade is the condition in which the value of exports and imports is more or less the same.

On the basis of the participating countries, international trade is divided into two types:

i) Bilateral trade- when it is carried out between two countries

ii) Multilateral trade -when it is carried out among many countries. Excluding light and valuable commodities, most of the international trade is carried out through water transport. The ships carrying cargo start and finish the journey at places which are known as ports. A port is a gateway to the land from the sea.

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