International trade

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International trade is the exchange of capital, goods, and services across international borders or territories. [1]

Contents

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. [2]

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.

Differences from domestic trade

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. [3]

History

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. [4] [ 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 [5] 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)

Volume of world merchandise exports Volume of world merchandise exports.png
Volume of world merchandise exports
RankCommodityValue in US$('000)Date of
information
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 [6]

Observances

President George W. Bush observed World Trade Week on May 18, 2001, and May 17, 2002. [7] [8] On May 13, 2016, President Barack Obama proclaimed May 15 through May 21, 2016, World Trade Week, 2016. [9] On May 19, 2017, President Donald Trump proclaimed May 21 through May 27, 2017, World Trade Week, 2017. [10] [11] World Trade Week is the third week of May. Every year the President declares that week to be World Trade Week. [12] [13]

See also

Lists

Notes

  1. "Trade – Define Trade at Dictionary.com". Dictionary.com.
  2. Staff, Investopedia (2003-11-25). "Balance Of Payments (BOP)". Investopedia. Retrieved 2017-05-07.
  3. 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: http://ssrn.com/abstract=1693334 ... this paper finds that the immigrant network effect on trade flows is weakened by the increasing level of immigrant assimilation.
  4. Leading merchandise exporters and importers, 2016
  5. excluding intra-EU trade
  6. International Trade Centre (ITC). "Trade Map - Trade statistics for international business development".
  7. Office of the Press Secretary (May 22, 2001). "World Trade Week, 2001" (PDF). Federal Register . Washington, D.C.: Federal Government of the United States. Archived from the original on May 22, 2001. Retrieved March 13, 2017.
  8. Office of the Press Secretary (May 22, 2002). "World Trade Week, 2002" (PDF). Federal Register . Washington, D.C.: Federal Government of the United States. Archived from the original on May 22, 2002. Retrieved March 12, 2017.
  9. "Presidential Proclamation -- World Trade Week, 2016". whitehouse.gov . Washington, D.C.: White House. May 13, 2016. Retrieved April 11, 2017.
  10. Office of the Press Secretary (May 19, 2017). "President Donald J. Trump Proclaims May 21 through May 27, 2017, as World Trade Week". whitehouse.gov . Washington, D.C.: White House . Retrieved May 20, 2017.
  11. "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.
  12. "Import Export Data". Import Export data. Retrieved 2017-10-06.
  13. "World Trade Week New York". World Trade Week New York. Retrieved 2017-10-06.

Related Research Articles

Single market type of trade bloc with most trade barriers removed

A single market is a type of trade bloc in which most trade barriers have been removed with some common policies on product regulation, and freedom of movement of the factors of production and of enterprise and services. The goal is that the movement of capital, labour, goods, and services between the members is as easy as within them. The physical (borders), technical (standards) and fiscal (taxes) barriers among the member states are removed to the maximum extent possible. These barriers obstruct the freedom of movement of the four factors of production.

A tariff is a tax on imports or exports between sovereign states. It is a form of regulation of foreign trade and a policy that taxes foreign products to encourage or safeguard domestic industry. Traditionally, states have used them as a source of income. Now, they are among the most widely used instruments of protectionism, along with import and export quotas.

Free trade Absence of government restriction on international trade

Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free market idea applied to international trade. In government, free trade is predominantly advocated by political parties that hold liberal economic positions while economically left-wing and nationalist political parties generally support protectionism, the opposite of free trade.

Import substitution industrialization trade and economic policy

Import substitution industrialization (ISI) is a trade and economic policy which advocates replacing foreign imports with domestic production. ISI is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialized products. The term primarily refers to 20th-century development economics policies, although it has been advocated since the 18th century by economists such as Friedrich List and Alexander Hamilton.

Protectionism Economic policy of restraining trade between states through government regulations

Protectionism is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations. Proponents claim that protectionist policies shield the producers, businesses, and workers of the import-competing sector in the country from foreign competitors. However, they also reduce trade and adversely affect consumers in general, and harm the producers and workers in export sectors, both in the country implementing protectionist policies and in the countries protected against.

Export shipping the goods and services out of the port of a country

An export in international trade is a good or service produced in one country that is bought by someone in another country. The seller of such goods and services is an exporter; the foreign buyer is an importer.

Dominican Republic–Central America Free Trade Agreement

The Dominican Republic– Central America Free Trade Agreement (CAFTA-DR) is a free trade agreement. Originally, the agreement encompassed the United States and the Central American countries of Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, and was called CAFTA. In 2004, the Dominican Republic joined the negotiations, and the agreement was renamed CAFTA-DR.

Non-tariff barriers to trade Type of trade barriers

Non-tariff barriers to trade (NTBs) or sometimes called "Non-Tariff Measures (NTMs)" are trade barriers that restrict imports or exports of goods or services through mechanisms other than the simple imposition of tariffs.

Australia–United States Free Trade Agreement

The Australia – United States Free Trade Agreement (AUSFTA) is a preferential trade agreement between Australia and the United States modelled on the North American Free Trade Agreement (NAFTA). The AUSFTA was signed on 18 May 2004 and came into effect on 1 January 2005.

The Harmonized Commodity Description and Coding System, also known as the Harmonized System (HS) of tariff nomenclature is an internationally standardized system of names and numbers to classify traded products. It came into effect in 1988 and has since been developed and maintained by the World Customs Organization (WCO), an independent intergovernmental organization based in Brussels, Belgium, with over 200 member countries.

International economics is concerned with the effects upon economic activity from international differences in productive resources and consumer preferences and the international institutions that affect them. It seeks to explain the patterns and consequences of transactions and interactions between the inhabitants of different countries, including trade, investment and transaction.

Market access

Market access describes the possibility of an enterprise or a country to sell their goods and services across borders and enter a foreign market. According to the World Trade Organization (WTO), "market access for goods in the WTO means the conditions, tariff and non-tariff measures, agreed by members for the entry of specific goods into their markets." Gaining market access is an indispensable step towards deepening trade relations. However, market access is not synonymous with free trade because the possibility to enter a foreign market is in most cases conditioned by certain requirements, whereas free trade implies a perfect state in which goods and services can be circulated across borders without such barriers. Indeed, tackling market access restrictions proves to be a more achievable goal for trade negotiations as compared to free trade.

Trade facilitation

Trade facilitation looks at how procedures and controls governing the movement of goods across national borders can be improved to reduce associated cost burdens and maximise efficiency while safeguarding legitimate regulatory objectives. Business costs may be a direct function of collecting information and submitting declarations or an indirect consequence of border checks in the form of delays and associated time penalties, forgone business opportunities and reduced competitiveness

Import good brought into a jurisdiction

An import is goods brought into a jurisdiction, especially across a national border, from an external source. The party bringing in the good is called an importer. An import in the receiving country is an export from the sending country. Importation and exportation are the defining financial transactions of international trade.

International Trade Centre organization

The International Trade Centre (ITC) is a multilateral agency which has a joint mandate with the World Trade Organization (WTO) and the United Nations (UN) through the United Nations Conference on Trade and Development (UNCTAD).

Success in export markets for developed and developing country firms is increasingly affected by the ability of countries to support an environment which promotes efficient and low cost trade services and logistics. Policies related to trade facilitation and economic development reflect the idea that trade can be a powerful engine for accelerating economic growth, job creation, and poverty reduction.

An Eco-tariff, also known as an environmental tariff, is a trade barrier erected for the purpose of reducing pollution and improving the environment. These trade barriers may take the form of import or export taxes on products that have a large carbon footprint or are imported from countries with lax environmental regulations.

Foreign trade of the United States comprises the international imports and exports of the United States

Foreign trade of the United States comprises the international imports and exports of the United States, one of the world's most significant economic markets. The country is among the top three global importers and exporters.

The ASEAN–India Free Trade Area (AIFTA) is a free trade area among the ten member states of the Association of Southeast Asian Nations (ASEAN) and India. The initial framework agreement was signed on 8 October 2003 in Bali, Indonesia. and the final agreement was on 13 August 2009. The free trade area came into effect on 1 January 2010. India hosted the latest ASEAN-India Commemorative Summit in New Delhi on 26 January 2018. In the financial year 2017-18, Indo-ASEAN bilateral trade grew by almost 14% to reach US$81.3 billion. India's imports from ASEAN were valued at US$47.13 billion while its exports to ASEAN stood at US$34.2 billion.

Foreign trade of Pakistan Imports and exports in Pakistan

This article covers topics relating to the foreign trade of Pakistan. For a more general overview, see economy of Pakistan.

References

Data

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