International trade

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International trade is the exchange of capital, goods, and services across international borders or territories [1] because there is a need or want of goods or services. [2]


In most countries, such trade represents a significant share of gross domestic product (GDP). While international trade has existed throughout history (for example Uttarapatha, Silk Road, Amber Road, scramble for Africa, Atlantic slave trade, salt roads), its economic, social, and political importance has been on the rise in recent centuries.

Carrying out trade at an international level is a complex process when compared to domestic trade. When trade takes place between two or more nations factors like currency, government policies, economy, judicial system, laws, and markets influence trade.

To smoothen and justify the process of trade between countries of different economic standing, some international economic organisations were formed, such as the World Trade Organization. These organisations work towards the facilitation and growth of international trade. Statistical services of intergovernmental and supranational organisations and national statistical agencies publish official statistics on international trade.

Characteristics of global trade

A product that is transferred or sold from a party in one country to a party in another country is an export from the originating country, and an import to the country receiving that product. Imports and exports are accounted for in a country's current account in the balance of payments. [3]

Trading globally may give consumers and countries the opportunity to be exposed to new markets and products. Almost every kind of product can be found in the international market, for example: food, clothes, spare parts, oil, jewellery, wine, stocks, currencies, and water. Services are also traded, such as in tourism, banking, consulting, and transportation.

Ancient Silk Road trade routes across Eurasia Silkroutes.jpg
Ancient Silk Road trade routes across Eurasia

Advanced technology (including transportation), globalisation, industrialisation, outsourcing and multinational corporations have major impacts on the international trade system.[ citation needed ]

Increasing international trade is crucial to the continuance of globalisation.[ citation needed ] Countries would be limited to the goods and services produced within their own borders without international trade. International trade benefits many countries in various aspects. In the case of Vizio’s flat-panel TVs, the manufacturing leadership has been shifting from one country to another due to global economic growth. At first, Japan could assemble the components of this TV and sell it out to the other countries such as US. However, recession affected Japan and South Korea took the lead in assembling the parts of this TV. Samsung played a critical role in the selling and manufacturing of the flat TV. Taiwan also took advantage of the recession that affected South Korea and the investors assembled electronic components of Vizio’s flat-panel TVs. At first the US suffered from this cycle because despite inventing this business idea, other countries implemented it in the international market. Chinese eventually started manufacturing flat TVs at a lower cost compared to the previous investors. It is important to note that US benefited from the cycle because many investors could manufacture the TV at lower cost (Kandel, Kosenko, Morck & Yafeh, 2013). China is also another country that benefited from this business because it started manufacturing the product late at a lower price. South Korea and Japan suffered from the global recession because it was expensive to manufacture Vizio’s flat-panel TVs at the beginning.

Despite the benefits that many countries enjoyed from selling Vizio’s flat-panel TVs, many nations suffered due to changes in international economy. Some countries experienced recessions that could not favor the manufacture of this product. For example, Japan became the first country to sell the flat-panel screens in 1990s but decade-long recession affected the business operations and surrendered to South Korea. It is also important to note that South Korea suffered the same fate from the Asian crisis in 1997 (Lazarev, 2007). Mexico is one lucky country that never suffered the consequences of crisis. The country could assemble flat-panel TVs after sourcing the electronic parts from other countries (Hill & Hult, 2019). In this regard, it is clear that countries that took part in the manufacture of these TVs were affected in different ways.

The US played a critical role in the invention and manufacture of the flat-panel TVs. In this regard, the decision made by the US may affect the entrepreneurs at the local and international level. If the US government demands that flat-panel displays be sold in the country only, the investors will have to sell the products at lower prices. It is clear that the prices of these flat-panel displays are cheap in the US compared to the countries. In addition, the local investors will not have the opportunity to compete at international level (Kandel, Kosenko, Morck & Yafeh, 2013). The quality of the screens can be compromised because the local manufacturers do not encounter foreign competitors.

The future production of these TVs will change. Technology is changing the mode of production from one year to another. For instance, the manufacture of these TVs began from assembling electronic parts from different countries. However, things have changed and currently, every country is aiming at using the local resources to manufacture the screens.

Differences from domestic trade

Ports play an important role in facilitating international trade. The Port of New York and New Jersey grew from the original harbor at the convergence of the Hudson River and the East River at the Upper New York Bay. Downtown Manhattan From Aeroplane.jpg
Ports play an important role in facilitating international trade. The Port of New York and New Jersey grew from the original harbor at the convergence of the Hudson River and the East River at the Upper New York Bay.

International trade is, in principle, not different from domestic trade as the motivation and the behavior of parties involved in a trade do not change fundamentally regardless of whether trade is across a border or not.

However, in practical terms, carrying out trade at an international level is typically a more complex process than domestic trade. The main difference is that international trade is typically more costly than domestic trade. This is due to the fact that a border typically imposes additional costs such as tariffs, time costs due to border delays, and costs associated with country differences such as language, the legal system, or culture (non-tariff barriers).

Another difference between domestic and international trade is that factors of production such as capital and labor are often more mobile within a country than across countries. Thus, international trade is mostly restricted to trade in goods and services, and only to a lesser extent to trade in capital, labour, or other factors of production. Trade in goods and services can serve as a substitute for trade in factors of production. Instead of importing a factor of production, a country can import goods that make intensive use of that factor of production and thus embody it. An example of this is the import of labor-intensive goods by the United States from China. Instead of importing Chinese labor, the United States imports goods that were produced with Chinese labor. One report in 2010 suggested that international trade was increased when a country hosted a network of immigrants, but the trade effect was weakened when the immigrants became assimilated into their new country. [4]


The history of international trade chronicles notable events that have affected trading among various economies.

Theories and models

There are several models which seek to explain the factors behind international trade, the welfare consequences of trade and the pattern of trade.

Most traded export products

Most traded export products.png

Largest countries by total international trade

Volume of world merchandise exports Volume of world merchandise exports.png
Volume of world merchandise exports

The following table is a list of the 21 largest trading nations according to the World Trade Organization. [5] [ failed verification ]

RankCountryInternational trade of
goods (billions of USD)
International trade of
services (billions of USD)
Total international trade
of goods and services
(billions of USD)
World 32,4309,63542,065
Flag of Europe.svg  European Union [6] 3,8211,6045,425
1Flag of the United States.svg  United States 3,7061,2154,921
2Flag of the People's Republic of China.svg  China 3,6866564,342
3Flag of Germany.svg  Germany 2,6267403,366
4Flag of the United Kingdom.svg  United Kingdom 1,0665711,637
5Flag of Japan.svg  Japan 1,2503501,600
6Flag of France.svg  France 1,0744701,544
7Flag of the Netherlands.svg  Netherlands 1,0733391,412
8Flag of Hong Kong.svg  Hong Kong 1,0641721,236
9Flag of South Korea.svg  South Korea 9022011,103
10Flag of Italy.svg  Italy 8662001,066
11Flag of Canada (Pantone).svg  Canada 807177984
12Flag of Belgium (civil).svg  Belgium 763212975
13Flag of India.svg  India 623294917
13Flag of Singapore.svg  Singapore 613304917
15Flag of Mexico.svg  Mexico 77153824
16Flag of Spain.svg  Spain 596198794
17Flag of Switzerland.svg   Switzerland 572207779
18Flag of the Republic of China.svg  Taiwan 51193604
19Flag of Russia.svg  Russia 473122595
20Flag of Ireland.svg  Ireland 248338586
21Flag of the United Arab Emirates.svg  United Arab Emirates 49192583

Top traded commodities by value (exports)

RankCommodityValue in US$('000)Date of
1Mineral fuels, oils, distillation products, etc.$2,183,079,9412015
2Electrical, electronic equipment$1,833,534,4142015
3Machinery, nuclear reactors, boilers, etc.$1,763,371,8132015
4Vehicles other than railway$1,076,830,8562015
5Plastics and articles thereof$470,226,6762015
6Optical, photo, technical, medical, etc. apparatus$465,101,5242015
7Pharmaceutical products$443,596,5772015
8Iron and steel$379,113,1472015
9Organic chemicals$377,462,0882015
10Pearls, precious stones, metals, coins, etc.$348,155,3692015

Source: International Trade Centre [7]


President George W. Bush observed World Trade Week on May 18, 2001, and May 17, 2002. [8] [9] On May 13, 2016, President Barack Obama proclaimed May 15 through May 21, 2016, World Trade Week, 2016. [10] On May 19, 2017, President Donald Trump proclaimed May 21 through May 27, 2017, World Trade Week, 2017. [11] [12] World Trade Week is the third week of May. Every year the President declares that week to be World Trade Week. [13] [14]

See also



  1. "Trade – Define Trade at".
  2. International Trade and Finance by ICC Academy
  3. Staff, Investopedia (2003-11-25). "Balance Of Payments (BOP)". Investopedia. Retrieved 2017-05-07.
  4. Kusum Mundra (October 18, 2010). "Immigrant Networks and U.S. Bilateral Trade: The Role of Immigrant Income". papers.ssrn. SSRN   1693334 . Mundra, Kusum, Immigrant Networks and U.S. Bilateral Trade: The Role of Immigrant Income. IZA Discussion Paper No. 5237. Available at SSRN: ... this paper finds that the immigrant network effect on trade flows is weakened by the increasing level of immigrant assimilation.
  5. Leading merchandise exporters and importers, 2016
  6. excluding intra-EU trade
  7. International Trade Centre (ITC). "Trade Map - Trade statistics for international business development".
  8. Office of the Press Secretary (May 22, 2001). "World Trade Week, 2001". Federal Register . Washington, D.C.: Federal Government of the United States. Archived from the original on November 24, 2016. Retrieved March 13, 2017. Alt URL
  9. Office of the Press Secretary (May 22, 2002). "World Trade Week, 2002". Federal Register . Washington, D.C.: Federal Government of the United States. Archived from the original on March 13, 2017. Retrieved March 12, 2017. Alt URL
  10. "Presidential Proclamation -- World Trade Week, 2016". . Washington, D.C.: White House. May 13, 2016. Retrieved April 11, 2017.
  11. Office of the Press Secretary (May 19, 2017). "President Donald J. Trump Proclaims May 21 through May 27, 2017, as World Trade Week". . Washington, D.C.: White House . Retrieved May 20, 2017.
  12. "President Donald J. Trump Proclaims May 21 through May 27, 2017, as World Trade Week". World News Network . United States: World News Inc. May 20, 2017. Retrieved May 20, 2017.
  13. "Import Export Data". Import Export data. Retrieved 2017-10-06.
  14. "World Trade Week New York". World Trade Week New York. Retrieved 2017-10-06.

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Export A good or service produced in one country that is sold into another country

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Import Good brought into a jurisdiction

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Official statistics

Data on the value of exports and imports and their quantities often broken down by detailed lists of products are available in statistical collections on international trade published by the statistical services of intergovernmental and supranational organisations and national statistical institutes. The definitions and methodological concepts applied for the various statistical collections on international trade often differ in terms of definition (e.g. special trade vs. general trade) and coverage (reporting thresholds, inclusion of trade in services, estimates for smuggled goods and cross-border provision of illegal services). Metadata providing information on definitions and methods are often published along with the data.

Other data sources