International Trade

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Dr.S.NAGALINGAM,

M.Com., M.Phil., P.G.D.C.A., Ph.D.,

Assistant Professor,

PG & Research Department of Commerce,

Cardamom Planters’ Association College,

Bodinayakanur.

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� International Trade�

Definition of International Trade

International trade is an exchange involving a good or service conducted between at least two different countries. The exchanges can be imports or exports. An import refers to a good or service brought into the domestic country. An export refers to a good or service sold to a foreign country.

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�International Trade Happen�

International trade allows domestic markets to provide a variety of goods and services to their citizens that they would have otherwise been unavailable or restricted. Some of the key reasons why international trade is practised widely are:

1. Availability of resources

Different countries are rich in different resources. Resources like petrol and even consumables are required across the world, but not every country produces it. These resources could also be land, labour, capital and natural resources including steel, gold and diamonds. For example, Middle East countries have rich oil reserves, and so they are capable of exporting oil to countries that do not have domestic oil fields.

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�2. Production of goods�

Due to the non-availability of a few natural resources, it becomes impossible for a country to produce all types of goods that require such raw materials. The other factors that impact production capabilities are labour, capital and services that are accessible at various rates across the world. This is why international trade is necessary.

3. Cost of production

Countries usually find it profitable to create only those goods and services that can be produced efficiently with minimum effort and expense. For example, India is home to many spices as it holds the benefit of agricultural lands that many international countries do not have. Thus, India is one of the top exporters of spices across the world.

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�4. Technology�

Technology is another factor that creates the demand for importing and exporting goods and services. Many countries face problems due to the limitation of technology and infrastructure. Services such as banking, communication, advertising and transportation use modern-day technology and countries who hold expertise in this sector help other countries through international trade.

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