Domestic Trade (Meaning and Explanation)

We explain what internal trade is, what types exist and we offer you various examples. Also, what is foreign trade.

The saleswoman delivers her products to the customer. — Domestic trade is an indicator of economic development.

What is internal trade?

Internal trade, internal trade or internal market It is the set of operations for the exchange of goods and merchandise between merchants and individuals belonging to the same locality (for example, the same country) and therefore subject to the same commercial rules. In this it is distinguished from foreign trade or international trade, which involves commercial exchange between different countries.

Domestic trade is considered an indicator of economic activity and therefore of the economic development of a country or a region within it. The greater the volume of transactions carried out within a certain geographic limit, the greater the estimated wealth available to its citizens. In that sense, it does not matter if it is national or foreign merchandise, nor if it is marketed by large companies or small businesses, as long as it is produced between citizens of the same country and according to the same regulatory framework.

In fact, The regulation of the internal market of countries is one of the most heated topics of debate in the economy of the era of globalization. In many countries the State intervenes in defense of the internal market and national producers (protectionism), while others embrace different degrees of free market and free competition (free trade).

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Importance of internal trade

Internal trade is a key factor in the development of a country, since maintains the constant flow of money and, therefore, the strengthened economy. On the other hand, internal trade allows the distribution of wealth and the entry of resources to the State since it is a source of tax collection.

A robust internal trade, capable of satisfying the demands of the local population, in addition, allows a country to depend less on imported materials and be economically self-sufficient.

Examples of internal trade

Examples of activities linked to domestic trade are:

The purchase and sale of groceries and detergents in the supermarket.
The consumption of food and drinks in a restaurant or bar.
The contracting of telephone, internet or basic services from local companies.
The purchase and sale of real estate, cars or land in the country.
The purchase and sale of locally manufactured industrial supplies.

Types of domestic trade

Customers look at products in a wholesale supermarket. — Wholesale trade consists of the purchase/sale of large volumes of merchandise.

Domestic trade can be of two types:

Wholesale or wholesale trade. It consists of the purchase/sale of large volumes of merchandise (boxes, packages or several copies) directly from producers, to then be sold by retail companies. For example, supermarkets buy merchandise in bulk and then sell it separately.
Retail or retail trade. It consists of the purchase/sale of individual merchandise, usually direct to the final consumer. This is what happens in the stores where we shop every day, in the supermarket or an appliance store.

Foreign trade

Foreign trade or international trade It is the exchange of services and merchandise between two different countries (export and import) in accordance with international trade laws and economic agreements that are in force.

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Just like internal trade, international trade can serve as a reflection of the state of the local economy, given that a country that exports a lot is, necessarily, a country that produces a lot, and that translates into an internal economy in continuous movement. On the other hand, a country that imports a lot is usually a country with an economy dependent on products made in other countries.

Trade balance

It is known as the trade balance. comparative study between imports and exports of a country during a given period of time. Depending on whether a country is dominated by exports (foreign sales) or imports (foreign purchases), it can be said respectively that it has a favorable or unfavorable trade balance.

A favorable trade balance brings with it a trade surplus that is, an amount of extra money resulting from selling more products abroad than are purchased. Instead, An unfavorable trade balance is usually accompanied by a trade deficit that is, a lack of additional resources because almost everything is invested in purchasing merchandise abroad.

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