INTRODUCTION TO INTERNATIONAL TRADE

Businesses all across the world recognize that international trade plays a significant role in their
overall operations. Many nations buy their raw resources from other nations or export a sizable
amount of their production. A variety of products and processes are made available by
international trade that are not logically possible if trade is restricted.
International trade is the exchange of money across national or territorial boundaries. It is distinct from
domestic trade, which takes place within a country and uses the local currency.

International trade is significantly impacted by industrialization, modern transportation, and

globalization.
Trade is the exchange of goods and services between countries. This may be between two
countries, which is called bilateral trade or trade among many countries called multinational
trade.

REASONS FOR INTERNATIONAL TRADE

1. Opportunity Cost
- Simply said, this is the benefit of using a resource in comparison to the benefit of the
best alternative.
2. Comparative Advantage/Factor Endowment
- For instance, a developed nation with a lot of expensive capital equipment, like the
United States, can specialize in products like chemicals, automobiles, or other high-
tech commodities.
3. Absolute Advantage
- a country's capacity to produce a specific good with fewer resources
4. Competition
- The expansion of competitors is a result of global trade. Products from within the
country and imports compete for market share.

5. Access to Capital/Greater Return of Capital

- Investments abroad may provide greater returns than new investments made
domestically.
6. Economic and Social Development
- One of the key drivers of international trade is trade between nations. The
underdeveloped nations' economic and social growth is accelerated by international
trade.
PREVAILING PROBLEMS OF INTERNATIONAL TRADE
1. Cultural differences
2. Currency problem
3. Legal protection
4. Foreign political climates

FORMS OF INTERNATIONAL TRADE

1. DIRECT EXPORTING - Requesting orders from other countries for goods and services that
are produced in one nation and then exported to other nations, like Europe or the
Middle East, is what it entails.
2. FOREIGN LICENSING - This is yet another significant type of trade that takes place
between two or more nations.