What You Must Know About International Trade
International trade can be termed as an exchange of services as well as goods between the countries or the international boundaries. It was during the ancient times that such trade of countries took place. Often, the international trade had such significant influence in finding out the socio-economic, cultural and political scenario of a country.
The international trade between countries is influenced by such existing bilateral relations of the nations. During the early times, international trade was regulated and was influenced by high tariffs. At this period, the countries applied the policy of mercantilism which is the inflow of the capital being determined by the nation’s prosperity. But, with the advent of globalization as well as industrialization in the 19th century, such regulations have been relaxed and also the concept of free trade was adopted. With such model, the trade is not being regulated by any kind of government-imposed restrictions that include tariffs and taxes. The economically-powerful and developed nations that include the UK, Europe and US have been considered the strongest advocates of such policy.
There are a lot of theories that are in practice for the purpose of getting to know the tariffs and the patterns of the international trade. The gravity model of trade presents such more detailed analysis about the trading pattern in so many parts of the world. With this model, the geographical distance of the countries as well as their economic sizes are considered while making the analysis.
In the present scenario, the international trade is regulated by the guidelines that were established by the World Trade Organization. However, the trade between the two countries is also influenced by the economic treaties among the countries. There are some of these agreements which include NAFTA between countries.
Despite of the regulations involved in the process, international trade still offers different potential risks at the economic and political fronts. Some would include the cancellation of the international export or the import of licenses, the risks which are involved due to war, the risk of imposing a ban on the imported products after shipment of consignment as well as the currency exchange controls.
Due to international trade, you are allowed to expand the markets for both services and goods which otherwise may not have been available to you. This is the main reason why you would choose between Japanese, American or the German car. Because of such international trade, the market has a greater competition and this means that there are more reasonable costs that bring a much cheaper product to the consumer. The international trade provides a rise to the world economy, wherein the prices of the supply and demand, affect and get affected by the global events.
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