International trade

Last updated

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

In economics, capital consists of an asset that can enhance one's power to perform economically useful work. For example, in a fundamental sense a stone or an arrow is capital for a caveman who can use it as a hunting instrument, while roads are capital for inhabitants of a city.

Goods tangible and intangible thing, except labor tied services, that satisfies human wants and provides utility

In economics, goods are materials that satisfy human wants and provide utility, for example, to a consumer making a purchase of a satisfying product. A common distinction is made between goods that are tangible property, and services, which are non-physical. A good may be a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods, such as air, are naturally in abundant supply and need no conscious effort to obtain them. Personal goods are things such as televisions, living room furniture, wallets, cellular telephones, almost anything owned or used on a daily basis that is not food related. Commercial goods are construed as any tangible product that is manufactured and then made available for supply to be used in an industry of commerce. Commercial goods could be tractors, commercial vehicles, mobile structures, airplanes and even roofing materials. Commercial and personal goods as categories are very broad and cover almost everything a person sees from the time they wake up in their home, on their commute to work to their arrival at the workplace.

Service (economics) intangible offering inseparable from its creators labor, which brings utility value to their buyer

In economics, a service is a transaction in which no physical goods are transferred from the seller to the buyer. The benefits of such a service are held to be demonstrated by the buyer's willingness to make the exchange. Public services are those that society as a whole pays for. Using resources, skill, ingenuity, and experience, service providers benefit service consumers. Service is intangible in nature.

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.

Trade Exchange of goods and services.

Trade involves the transfer of goods or services from one person or entity to another, often in exchange for money. A system or network that allows trade is called a market.

Gross domestic product market value of goods and services produced within a country

Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced in a period of time, often annually. GDP (nominal) per capita does not, however, reflect differences in the cost of living and the inflation rates of the countries; therefore using a basis of GDP per capita at purchasing power parity (PPP) is arguably more useful when comparing differences in living standards between nations.

Ancient Buddhist and Hindu texts use Uttarapatha as the name of the northern part of Jambudvipa, one of the "continents" in Hindu history. In modern times, the Sanskrit word uttarapatha is sometimes used to denote the geographical regions of North India, Western India, Central India, Eastern India, Northeast India, Pakistan, Bangladesh, and Nepal in just one term. The pronunciation of the word varies depending on the regional language of the speaker.

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 the trade. International economic and trade organizations address the process of trade as the political relations between two countries also influences the trade between them and the obstacles of trading affect the mutual relationship adversly. To smoothen and justify the process of trade between countries of different economic standing, some international economic organisations were formed. These organisations work towards the facilitation and growth of international trade.

Domestic trade, also known as internal trade, is the exchange of domestic goods within the boundaries of a country. This may be sub-divided into two categories, wholesale and retail. Wholesale trade is concerned with buying goods from manufacturers or dealers or producers in large quantities and selling them in smaller quantities to others who may be retailers or even consumers. Wholesale trade is undertaken by wholesale merchants or wholesale commission agents.

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]

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.

Import good brought into a jurisdiction

An import is a good 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.

Trading globally gives 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: food, clothes, spare parts, oil, jewellery, wine, stocks, currencies, and water. Services are also traded: tourism, banking, consulting, and transportation

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

Advanced technology (including transportaction)globalisation, industrialisation, outsourcing andmultinational corporations have major impact on the international trade system.

Transport human-directed movement of things or people between locations

Transport or transportation is the movement of humans, animals and goods from one location to another. In other words the action of transport is defined as a particular movement of an organism or thing from a point A to the Point B. Modes of transport include air, land, water, cable, pipeline and space. The field can be divided into infrastructure, vehicles and operations. Transport is important because it enables trade between people, which is essential for the development of civilizations.

Industrialisation period of social and economic change from agrarian to industrial society

Industrialisation is the period of social and economic change that transforms a human group from an agrarian society into an industrial society, involving the extensive re-organisation of an economy for the purpose of manufacturing.

Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity that is or could be done internally.

Increasing international trade is crucial to the continuance of globalisation. Nations would be limited to the goods and services produced within their own borders without international trade.


Differences between international trade and 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.Carrying out trade at an international level is 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.

Another difference between domestic and international trade is that factors of production such as capital and labor are typically 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] [ not in citation given ]

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 Germany.svg  West Germany 3,8211,6045,425
1Flag of the Soviet Union.svg  Soviet Union 3,7061,2154,921
2Flag of East Germany.svg  East Germany 3,6866564,342
3Flag of Germany.svg  Germany 2,6267403,366
4Flag of the United Kingdom.svg  United Kingdom 1,0665711,637
5Flag of the Qing Dynasty (1889-1912).svg  Qing dynasty 1,2503501,600
6Flag of France.svg  France 1,0744701,544
7Flag of the Netherlands.svg  Netherlands 1,0733391,412
8Flag of The Russian Empire 1883.svg  Russian Empire 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 [5]

Observances

President George W. Bush observed World Trade Week on May 18, 2001, and May 17, 2002. [6] [7] On May 13, 2016, President Barack Obama proclaimed May 15 through May 21, 2016, World Trade Week, 2016. [8] On May 19, 2017, President Donald Trump proclaimed May 21 through May 27, 2017, World Trade Week, 2017. [9] [10] World Trade Week is the third week of May. Every year the President declares that week to be World Trade Week. [11] [12]

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. International Trade Centre (ITC). "Trade Map - Trade statistics for international business development".
  6. 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.
  7. 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.
  8. "Presidential Proclamation -- World Trade Week, 2016". whitehouse.gov . Washington, D.C.: White House. May 13, 2016. Retrieved April 11, 2017.
  9. 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.
  10. "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.
  11. "Import Export Data". Import Export data. Retrieved 2017-10-06.
  12. "World Trade Week New York". World Trade Week New York. Retrieved 2017-10-06.

Related Research Articles

Single market

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 form of regulation of foreign trade, a policy that taxes foreign products to encourage or protect domestic industry; a tax on imports or exports between sovereign states. The tariff is historically used to protect infant industries and to allow import substitution industrialization.

Free trade policy in which countries governments do not restrict imports from, or exports to, other countries

Free trade is a trade policy that does not restrict imports or exports; it is the idea of the free market as applied to international trade. In government, free trade is predominately 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.

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.

Trade barrier Restrictions limiting international trade

Trade barriers are government-induced restrictions on international trade.

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 migration.

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

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.

In economics, gains from trade are the net benefits to economic agents from being allowed an increase in voluntary trading with each other. In technical terms, they are the increase of consumer surplus plus producer surplus from lower tariffs or otherwise liberalizing trade.

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.

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.

Comext is a statistical database on trade of goods managed by Eurostat, the Statistical Office of the European Commission. It is an important indicator of the performance of the European Union (EU) economy, because it focuses on the size and the evolution of imports and exports.

Import parity price or IPP is defined as, “The price that a purchaser pays or can expect to pay for imported goods; thus the c.i.f. import price plus tariff plus transport cost to the purchaser's location. This and the export parity price together define a range of the possible equilibrium prices for equivalent domestically produced goods”.

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