We explain what international trade is, its importance, advantages and characteristics. Also, differences with foreign trade.
What is international trade?
When we talk about foreign trade, international trade or world trade, we refer to the set of economic transactions that involve the exchange of goods and services between different countries and their respective internal markets.
This exchange allows products to travel and be positioned in other regions, reaching new consumers. On the way, It also generates an important exchange of currencies.
In the world, most countries participate in one way or another in international trade, either as sellers (exporters) or buyers (importers) to some extent or another, for which they have “open” economies.
This opening began during the second half of the 20th century and especially in the 1990s, thanks to the incorporation of Latin American nations, large suppliers of raw materials. At the same time, the Asian and Eastern European markets also opened.
This phenomenon of globalization of the economy has allowed foreign trade to grow in volume and importance, as it significantly affects internal or local trade (internal borders).
See also: Globalization
Characteristics of international trade
International trade, involving not individuals or entities, but entire countries, always given in international currencies (hard currencies, such as the US dollar) and according to a fixed set of rules determined by the countries involved.
Some nations, for example, protect their own industries from foreign products through tariff barriers, that is, import taxes, to make foreign products more expensive and prevent them from competing with local ones. But not all have the same relationship with imports, and Some countries encourage consumption that is more dependent on foreign sources than others.
The balance of payments of a country compares the financial volume imported with that exported determining how autonomous a nation is commercially. If it exports more than it imports, it enjoys an advantageous commercial position vis-à-vis other nations, while if it imports more than it exports, it faces the international market in a weaker position.
Importance of international trade
Since its emergence and massification on a global scale, international trade has only grown in importance. On the one hand, because The volume of money and goods it moves is enormous thus promoting the productive development of nations and allowing others to obtain goods and services that they cannot provide for themselves.
But on the other hand, The commercial relationship of countries dictates an important portion of their diplomatic relations. Consequently, it is common to associate economic measures and global cycles of capitalism with the outbreak of wars and tensions between the various hegemonic powers of the world.
Advantages of international trade
The possibility of purchasing goods and services produced abroad entails certain indisputable advantages. For example, access to international quality products made in industrialized countries that would otherwise be impossible to have, allows less technologically advanced nations to access innovations.
Furthermore, these types of exchanges encourages regional specialization so that countries can compete with what they are best at, and thus lead a certain sector of international trade, no matter how small.
Finally, by diversifying risk, international trade allows obtaining diverse inflows of money. That is to say that Countries do not depend entirely on the internal market. Although the latter is also a double-edged sword, since it implies a high degree of dependence on the outside.
Difference with foreign trade
This difference is actually about the breadth with which we think about both concepts, since they are generally considered synonymous. Thus, when we talk about international trade, we generally refer to all commercial transactions that occur between countries, that is, from a joint perspective.
On the contrary, When talking about foreign trade, we assume ourselves to be within a nation and we refer to those activities that said country trades abroad, that is, that it exports to other countries.
Continue with: Foreign trade
References
- “International trade” on Wikipedia.
- “What is International Trade? Advantages and disadvantages” (video) in Commerce and Customs.
- “Difference between international trade and foreign trade” in Economipedia.
- “What is international trade?” at EAE Business School.
- “Introduction to foreign trade: what it is and advantages for participating countries” at IE Business School.
