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International trade.

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Topic updated on 02/14/2019 05:01am

When one country trades with another country or countries, it is called international
trade.
— International trade is based on the following factors.

  • Indirect production
  • A surplus or deficit of production’
  • Cost of production
  • Globalization
  • Changes in preferences
  • Promotion of goods
  • Less trade barriers

— When a country buys goods from a foreign country, it is called import. The relevant country has to pay foreign exchange for this transaction.
— When a country sends goods to a foreign country or countries, it is called export. The relevant country receives foreign exchange from this transaction.
— When the goods imported from foreign countries are exported after processing or not processing inside the harbor, it is called entreport and when the imported goods are brought into the country and exported again after changing them or not making any change to them, it is called re-exports.
— A country can achieve many benefits by being involved in international trade.

  • Ability to export surplus production
  • Ability to import products which cannot be produced.
  • Ability to earn foreign exchange.
  • Improvements in international trade relationships.
  • Improvements in new technology and management competencies.
  •  Paving way to new international markets
  • Improvements in international co-operation .
  • Ability to consume more goods.

— When different parties can independently import and export goods without any barriers, it is called free trade.
— The barriers to free trade can be classified as tariffs and non-tariffs.
— Imposing of tariffs for international trade is a barrier to free trade.
—There are non tariff factors too which act as barriers to free trade.
Examples :

  • Import limitations/ quota
  • Export limitations/ quota
  • Export/ Import bans
  • Trade agreements
  • Rigid exchange policies
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