International Trade refers to the buying and selling of goods and services between countries e.g. between Nigeria and the United States of America, Ghana or Britain, etc.
(e) Differences in tastes: Countries have to import different or some commodities required by citizens which they cannot produce in great quantities e.g. manufactured goods, shoes, plastics.
(f) Differences in Industrial development and the level of Technology: The more advanced coun- tries are developed both industrially and technologically hence the developing nations have to import most manufactured goods from them. The advanced technology in most of the developed countries enable them to produce a good number of machines and equipment, which the less developed countries could not produce. By trading they can exchange.
In other words the term “International Trade” refers to the exchange of goods and services that take place across International Boundaries.
International Trade also is simply defined as the trade across the borders of a country. This may be between two countries, which is called bilateral trade or trade among many countries called multilateral trade.
International Trade is also referred to as International specialisation or International division of labour. The essence of International Trade is to enable countries obtain the greatest possible advantage from the exchange of one kind of commodity or another.
International Trade is across the borders involving different nationalities with different languages and currency. e.g. Nigeria and England.
Vaish (1980:589-592) observed some distinguishing special features of International Trade. One of those salient features according to Vaish (1980) is the immobility of factors of production. The fact remains that in recent times, international movement of factors of production is subjected to much restriction while domestic factor mobility has been on the increase with increase in means of transportation and communication. Thus, this is a difference enough to indicate or distinguish between domestic and International Trade.
Another distinguishing feature is the presence of single currency in domestic trade and multiplicity of currency in international trade.
The third feature of International Trade that makes it distinct is the controls and regulations inherent in the existence of boundaries. Such controls take the form of import restrictions, protectionism, custom duties and other controls, which do not exist, in domestic trade. Critics cannot disprove the fact that both the payment and every aspect of international trade are highly controlled.
The next difference is the presence of linguistic, cultural and political differences between the people of one country and those of another international trade. Although critics argue that language and cultural barri- ers can still be present in domestic trade in a country with more than one official language and cultures, the fact still holds that people from the same country tend to have a way of understanding themselves more even when their cultures and languages differ. This makes the domestic trade to have less barriers than interna- tional trade.
The fifth point to consider is the difference in geographical and transportation, more complex and costlier whether by land, sea or air in international trade. The packaging, insurance, banking and other processes involved in international trade do not apply in the national or domestic trade.
Other differences include differences in the legal systems of various countries, difference in customer demands and also the issue of balance of payment.
From the foregoing, it becomes clear that even when there are some similarities in home and foreign trade they are not exactly the same. It needs be stated, however, that both types of trade are not independent of each other. Both domestic and foreign trade helps to satisfy the needs of the citizens of a country.
No country in the world produces all that her people need. Thus, International Trade is as important as domestic trade if not more.
Nations trade with each other due to the following reasons:
(a) Necessity: - No country is self-sufficient which means that they have to buy from other countries those things they cannot produce.
(b) Because of the uneven distribution of National resources: National resources are not distributed evenly in all countries e.g. in Nigeria we have oil, tin, coal, etc., but Ghana has Gold, etc. Different countries have different mineral resource endowment. Such mineral deposits include coal, tin ore, oil, gold, lead, etc. A country largely supplies of one but with less of others, hence such a country will trade with countries that have such so as to obtain the one she does not have.
(c) Differences in climate: Some crops can only do well under certain climatic conditions e.g. tropical crops such as cotton, cocoa, etc., will not do well in Temperate zones and vice versa. Many commodi- ties, particularly agricultural products are produced under different climatic conditions. Tropical coun- tries produced Cocoa, palmoil products, rubber, etc., while variation of diary products are produced in the temperate regions, hence the need to exchange.
(d) The existence of special skills in some countries: Some countries have acquired worldwide repu- tation at making certain products e.g. Switzerland is known for making watches. Japan is known for making electronics, etc.
The inhabitants of a region may develop a special skill for the production of a commodity, which in time may acquire a special reputation for quality. Wines such as champagne sherry, port, chianti owe their distinctive qualities partly to the special flavour of locally grown grapes and partly to the local method of manufacture, Scotch and Irish Whisky have similarly acquired distinction. By exchanging some of its own products for those of other regions, a country can enjoy a much wider range of commodities than otherwise would be open to it.
International Trade also is simply defined as the trade across the borders of a country. This may be between two countries, which is called bilateral trade or trade among many countries called multilateral trade.
International Trade is also referred to as International specialisation or International division of labour. The essence of International Trade is to enable countries obtain the greatest possible advantage from the exchange of one kind of commodity or another.
International Trade is across the borders involving different nationalities with different languages and currency. e.g. Nigeria and England.
Vaish (1980:589-592) observed some distinguishing special features of International Trade. One of those salient features according to Vaish (1980) is the immobility of factors of production. The fact remains that in recent times, international movement of factors of production is subjected to much restriction while domestic factor mobility has been on the increase with increase in means of transportation and communication. Thus, this is a difference enough to indicate or distinguish between domestic and International Trade.
Another distinguishing feature is the presence of single currency in domestic trade and multiplicity of currency in international trade.
The third feature of International Trade that makes it distinct is the controls and regulations inherent in the existence of boundaries. Such controls take the form of import restrictions, protectionism, custom duties and other controls, which do not exist, in domestic trade. Critics cannot disprove the fact that both the payment and every aspect of international trade are highly controlled.
The next difference is the presence of linguistic, cultural and political differences between the people of one country and those of another international trade. Although critics argue that language and cultural barri- ers can still be present in domestic trade in a country with more than one official language and cultures, the fact still holds that people from the same country tend to have a way of understanding themselves more even when their cultures and languages differ. This makes the domestic trade to have less barriers than interna- tional trade.
The fifth point to consider is the difference in geographical and transportation, more complex and costlier whether by land, sea or air in international trade. The packaging, insurance, banking and other processes involved in international trade do not apply in the national or domestic trade.
Other differences include differences in the legal systems of various countries, difference in customer demands and also the issue of balance of payment.
From the foregoing, it becomes clear that even when there are some similarities in home and foreign trade they are not exactly the same. It needs be stated, however, that both types of trade are not independent of each other. Both domestic and foreign trade helps to satisfy the needs of the citizens of a country.
No country in the world produces all that her people need. Thus, International Trade is as important as domestic trade if not more.
Nations trade with each other due to the following reasons:
(a) Necessity: - No country is self-sufficient which means that they have to buy from other countries those things they cannot produce.
(b) Because of the uneven distribution of National resources: National resources are not distributed evenly in all countries e.g. in Nigeria we have oil, tin, coal, etc., but Ghana has Gold, etc. Different countries have different mineral resource endowment. Such mineral deposits include coal, tin ore, oil, gold, lead, etc. A country largely supplies of one but with less of others, hence such a country will trade with countries that have such so as to obtain the one she does not have.
(c) Differences in climate: Some crops can only do well under certain climatic conditions e.g. tropical crops such as cotton, cocoa, etc., will not do well in Temperate zones and vice versa. Many commodi- ties, particularly agricultural products are produced under different climatic conditions. Tropical coun- tries produced Cocoa, palmoil products, rubber, etc., while variation of diary products are produced in the temperate regions, hence the need to exchange.
(d) The existence of special skills in some countries: Some countries have acquired worldwide repu- tation at making certain products e.g. Switzerland is known for making watches. Japan is known for making electronics, etc.
The inhabitants of a region may develop a special skill for the production of a commodity, which in time may acquire a special reputation for quality. Wines such as champagne sherry, port, chianti owe their distinctive qualities partly to the special flavour of locally grown grapes and partly to the local method of manufacture, Scotch and Irish Whisky have similarly acquired distinction. By exchanging some of its own products for those of other regions, a country can enjoy a much wider range of commodities than otherwise would be open to it.
(e) Differences in tastes: Countries have to import different or some commodities required by citizens which they cannot produce in great quantities e.g. manufactured goods, shoes, plastics.
(f) Differences in Industrial development and the level of Technology: The more advanced coun- tries are developed both industrially and technologically hence the developing nations have to import most manufactured goods from them. The advanced technology in most of the developed countries enable them to produce a good number of machines and equipment, which the less developed countries could not produce. By trading they can exchange.
(g) Access to Capital: International Trade enables countries with limited capital to either borrow from
capital rich countries or attract direct investment into the countries and thus enjoy the benefits of imported capital and technology.
capital rich countries or attract direct investment into the countries and thus enjoy the benefits of imported capital and technology.
Students Assessment Exercise
- What gives rise to international trade?
- Are there any circumstance in which international trade should be discouraged by the government of a country?
- Explain carefully the circumstances in which nations find it beneficial to trade with each other.
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