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International Trade

Last Updated : 16 Aug, 2023
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International trade refers to the exchange or trade of goods and services occurring between countries and influences the world economy. Some of the most commonly traded commodities include clothes, machinery, raw material, and so forth. The volume of international trade has increased manyfold and covers different domains which include travel and tourism, banking, communication, advertising, and so forth. There has been an increase in foreign investment as well as the production of goods and services at the international level.


International Trade

International Trade

Trade is the exchange of goods between individuals, states, and countries. International trade refers to trading between two countries that takes place by water, air, or land. Local trade takes place in cities, towns, and villages, while state trade occurs between two or more states.

Without international trade, no country can live. It is made up of two parts: export and import. The difference between a country’s export and import is its trade balance. It is favorable when exports exceed imports; otherwise, it is unfavorable. India has trade links with all of the main trading blocs as well as all of the world’s geographical areas. Gems and jewelry, chemicals and associated products, agriculture and allied products, and other items are among the items exported from India to other countries.

Petroleum crude and products, gems and jewelry, chemicals and associated products, basic metals, electrical items, machinery, agriculture, and allied products are among the commodities imported into India. India has risen to prominence as a global software powerhouse, generating significant foreign exchange through information technology exports.

Reasons for International Trade

The reasons for international trade would include the following points:

  1. Production- It is not possible for every country to produce at an equal cost and because of this international trade takes place.
  2. Factors of Production- It includes labor, capital as well as raw materials for the production of goods that are available at various levels in different countries.
  3. Cost of Production- Countries prefer those countries in which production can take place at a lower cost.
  4. Resource Distribution- There is always the limitation of resource distribution and there is unequal distribution of resources in the country. Examples include jute products of Bengal, food products from Punjab, Kerala for spices, and so forth.

Outcomes of International Trade

The outcome of international trade would include-

  1. International trade between two or more countries assists all of them in making the most use of their natural resources. Every country can concentrate on producing goods and services from these resources and selling them to other countries in order to gain foreign cash and strengthen their economy.
  2. It enables a country to receive commodities and services that it would be unable to produce on its own due to a lack of resources or greater production costs. They may obtain these things at a reduced cost from outside the country.
  3. Some countries have advantages such as natural resources, labor, technology, and capital. These resources enable them to produce specific types of goods and services at lower costs and sell them to other countries that require them.
  4. It aids in smoothing out the advantages and putting a halt to the wild oscillations that can occur as a result of these items’ unavailability.

Aspect of Globalization

The aspect of globalization includes the following-

  1. Globalization leads to more trade and a higher standard of living. It increases competition in the domestic product, capital, and labor markets, as well as between countries with differing trade and investment strategies.
  2. Transnational corporations that invest in establishing plants in other nations give jobs to individuals in those countries, frequently lifting them out of poverty.
  3. Globalization has promoted cross-cultural understanding and sharing by lowering cross-border distances. A worldwide society that is neutral increases the rate at which people are exposed to the culture, attitudes, and values of people from different countries.
  4. It also gives poor countries the opportunity to thrive economically and spread prosperity through injections of international finance and technology.

Foreign Trade Policy (FTP) of India

FTP lays out the government’s plans to boost local production and exports in order to spur economic growth. The Directorate General of Foreign Trade, which is part of the Ministry of Commerce and Industry, is in charge of promoting and facilitating exports and imports. The Department of Commerce is responsible for making India a major player in global trade and establishing leadership roles in international trade organizations to match the country’s growing importance. The Department produces commodity and country-specific strategies in the medium term, and a strategic plan/vision and India’s Foreign Trade Policy in the long term.

Furthermore, India’s Foreign Trade Policy involves aiding exporters in maximizing GST benefits, closely monitoring export performance, improving cross-border trading ease, increasing revenue from agriculture-based exports, and promoting exports from MSMEs and labor-intensive businesses. State export partners have also been a priority for the Department of Commerce. As a result, state governments are developing export strategies based on the strengths of their specific industries.

India is a signatory to the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA), which aims to make transactions easier and cheaper. According to current WTO standards and those under consideration, India must gradually phase down subsidies and move toward fundamental systemic reforms.

RCEP and India

15 nations, led by China, Japan, South Korea, Australia, New Zealand, and the 10-member ASEAN grouping, inked the Regional Comprehensive Economic Partnership (RCEP), forming one of the world’s largest trading blocs. India had been a party to the talks for over nine years before withdrawing in November 2019, claiming that poor protections and cheaper customs tariffs will harm its industrial, agriculture, and dairy industries. However, by remaining outside, India has cut itself off from a trade bloc that accounts for 30% of global GDP and 2.2 billion people.

Frequently Asked Questions

Q 1. What is the use of pipeline transport?


Pipelines transmit crude oil, petroleum products, and natural gas from the oil and gas fields to refineries, fertilizer facilities, and large thermal power plants.

Q 2. In which states special provisions have been made to provide air services to the common people?


Only in the north-eastern states are specific preparations made to make aviation services available to the general public.

Q 3. What is trade? What is the distinction between international and domestic commerce?


Trade is the exchange of goods between individuals, states, and countries. International trade refers to trading between countries. Local trade occurs within a country’s cities, towns, and villages.

Q 4. Write a note on the changing nature of international trade in the last fifteen years.


International trade is the term for trading between countries. In the last fifteen years, international trade has changed dramatically. The interchange of information and knowledge has surpassed the exchange of goods and commodities. For example, India has risen to prominence as a global software powerhouse, generating significant foreign money through information technology exports.

International trade is also influenced by bilateral interactions as well as external variables such as taxes and duties on commodities transit. Various trade blocs have arisen in the last fifteen years, altering the way international trade was previously done.

Q 5. What is the significance of the border roads?


Border roads are strategically important, and these roads in the country’s border areas have increased accessibility in tough terrain and aided in the growth of these areas’ economies.

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