Trade means buying and selling of goods and services with the view of making profit.
Types of Trade
The opposite diagram illustrates the types of trade.
International Trade refers to trade between countries. When one country purchases goods and/or services from another country, commodities flow in and money flows out as a payment for these commodities.
Reasons for International Trade
- It makes foreign goods available
- It provides a market for surplus products
- It leads to better allocation of resources
- It brings in the advantage of International Specialization
- It enables transfer of technology from developed countries to developing countries
- It creates employment opportunities in export related industries
- It promotes friendship and cooperation among countries
- It brings fame and prestige
Case against International Trade
- There is the danger of overspecialization
- Foreign competition kills domestic infant firms
- It worsens the Balance of Payments position if exports are less than imports
- Developed countries may follow dumping
- It makes harmful goods available
- It may lead to the imposition of foreign cultures