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What Is International Trade

International trade involves the buying and selling of goods and services between countries. Imports refer to purchasing foreign products, while exports refer to selling domestic products overseas. Countries import goods that cannot be produced domestically or that are cheaper to import. They export goods they have a competitive advantage in producing. International trade faces barriers like tariffs and trading blocs that can increase costs of cross-border trade.

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Hafiza Guliyeva
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71 views

What Is International Trade

International trade involves the buying and selling of goods and services between countries. Imports refer to purchasing foreign products, while exports refer to selling domestic products overseas. Countries import goods that cannot be produced domestically or that are cheaper to import. They export goods they have a competitive advantage in producing. International trade faces barriers like tariffs and trading blocs that can increase costs of cross-border trade.

Uploaded by

Hafiza Guliyeva
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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What is international trade?

International trade relates to the process of a business or country buying and selling products to
and from other countries. This is often referred to as importing and exporting.

Imports – competition and buying from overseas


Importing refers to the process of purchasing goods or services from overseas and bringing
them into another country. For example, goods are brought into the UK in exchange for money
leaving the UK economy. In the UK, most companies import products and services.

Sometimes products are imported because they cannot easily be manufactured in the
importing country due to the climate, the capacity of businesses or the availability of raw
materials, for instance fruit and vegetables. For example, coffee beans are produced in
countries such as Colombia and need to be imported into the UK.

For other items, it is cheaper to purchase products from other countries than to make them
in the importing country. For example, the UK commonly imports electrical products from
China and India. A similar principle applies to the service industries. For example, the call
centres of many UK companies are located in India due to the cheaper labour costs in that
country.

Exports – selling to overseas markets


Exporting refers to a country selling products and services to other countries around the world.
When the UK sells products and services to foreign countries, money comes back into the UK
economy. One of the UK’s biggest exports is vehicles. Vehicles made by some of the biggest car
brands are produced in the UK and then shipped abroad in return for money.

International trading has some potential barriers that can make it difficult for businesses to trade
with some countries. The main two trading barriers are tariffs and trading blocs.

Tariffs
A tariff is a tax on imported goods and services. Many countries place tariffs on imported
goods and services to make them more expensive for businesses and consumers to buy.
They do this to restrict demand. By doing this, they aim to promote and protect businesses in
the home country. This is known as a protectionist measure.

Tariffs have the following advantages and disadvantages:

Advantages Disadvantages

More money for the government Imported goods and services become more
Advantages Disadvantages

expensive

Businesses in the home country have a better May cause other countries to impose tariffs in
chance of competing response, affecting exporters

The pattern of world trade


A trade surplus means that the value of exports is greater than imports. A trade deficit is when there
are more imports than exports.

Usually, MEDCs export valuable manufactured goods such as electronics and cars and import


cheaper primary products such as tea and coffee. In LEDCs the opposite is true. This means
that LEDCs have little purchasing power, making it difficult for them to pay off their debts or
escape from poverty.

The price of primary products fluctuates on the world market which means that workers and
producers in LEDCs lose out when the price drops. The price of manufactured goods is
steadier which means that MEDCs always benefit.

Increasing trade and reducing their balance of trade deficit is essential for the development of
LEDCs. However, sometimes MEDCs impose tariffs and quotas on imports. Tariffs are taxes
imposed on imports, which makes foreign goods more expensive to the consumer. Quotas are
limits on the amount of goods imported and usually work in the MEDC's favour.

Interdependence
Interdependence between countries means that they are dependent on one another in some
way. For example, many LEDCs are dependent on MEDCs for manufactured goods or aid.
MEDCs are dependent on LEDCs for primary products such as steel and iron. LEDCs are also
dependent on MEDCs for income from tourism, whilst MEDCs require LEDCs to provide the
climate and hospitality for some holiday destinations.

1.
Trading blocs
A trading bloc is another potential barrier to international trade. A trading bloc is a group of
countries that work together to provide special deals for trading. This promotes trade
between specific countries within the bloc.

The European Union (EU) is an example of a trading bloc. All of the countries within the EU can
trade freely with each other, which means that no tariffs are put in place. This makes goods and
services cheaper, which is good for both businesses that export and businesses that import within
the EU. However, the EU also charges tariffs on many goods and services imported from outside
the EU, which makes them more expensive.

Trading blocs have the following advantages and disadvantages:

Advantages Disadvantages

Promotes free trade, which means trading Importing and exporting to countries outside the
without tariffs trading bloc can be expensive

There is often free movement of labour, eg Countries can often only be part of one trading bloc,
people, across trading blocs which means they cannot enter others

Creates good trading relationships with


other countries in the trading bloc

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