International Trade – Domestic Trade

You walk into a lavish supermarket to buy Brazilian coffee, American Wine, Indian Saffron & China’s Silk… & you returns satisfied & happy loosing all your money.

What Happened, How did you managed to get everything at few meters from your doorstep ?
This is the magic of International Trade (IT), A phenomenon to exchange capital, goods, and services across international borders or territories & that’s why we have infinite choices to pick up from Markets.Not only IT contributes significantly in GDP but provides us an opprotunity to expose to new Market & Products.

Bookish Knowledge: International trade is also a branch of economics, which, together with international finance, forms the larger branch called international economics.

If India sells its Khadi to Global Market its export but if buys Uranium from Canada then we are importing it.

Key point : Imports and exports are accounted for in a country’s current account in the balance of payments.

Factors that affects IT are :
Industrialization, advanced technology, including transportation, globalization, multinational corporations, and outsourcing

 

How does it impact you & me?

• Greater competition and therefore more competitive prices, cheaper product.
• Wide variety of options
• Better quality
• Easy accessibility
• & Finally Consumer is the king.

Global Impact — Countries become interdependent, Happenings in one part hampers the overall economy. It will not only effect your buying behaviour but demands & supply in market sometimes can lead to crisis like recent oil crisis.

What does a country get?

• Efficient use of Natural, Human resources
• Technological Advancements
• Competitive Atmosphere
• Dominance or specialisation in particular sector
• Proper utilisation of demographic dividend, geography
• More Participation in global economy hence better growth opportunities
• Increase in foreign direct investment
• Maximise Countries capacity to produce & acquire goods
• E.g. China, India

Two theories of IT based on level of control placed on trade
Free trade : free market, with no restrictions on trade. Funda is supply & demand in global market will ensure efficient production.market force will promote trade.

Protectionism : Regulated Market, important to ensure that markets function properly.
Protectionism exists in many different forms, but the most common are tariffs, subsidies and quotas.Theory believes protectionism will keep efficiency intact.

Difference between IT & Domestic Trade

• IT more costly due to tariffs, time costs due to border delays and costs associated with country differences such as language, the legal system or culture.
• capital and labor are typically more mobile within a country than across countries.

Top traded commodities in global Market

• Mineral fuels, oils, distillation products, etc
• Electrical, electronic equipment
• Machinery, nuclear reactors, boilers, etc.
• Vehicles other than railway
• Plastics and articles thereof
• Optical, photo, technical, medical, etc. apparatus
• Pharmaceutical products
• Iron and steel

Largest countries by total international trade
China – US – Germany – Japan  – France – UK – South korea – India (12th)

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