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international trade

International trade: What does the term mean?

International trade, the global economy, and globalisation are all terms we hear daily. Basically they all mean the same thing.


International trade is the exchange of capital, goods, and services across international borders or territories, which could involve the activities of the government and individual. In most countries, such trade represents a significant share of gross domestic product (GDP).


Based strictly on the amount that the terms are used it could be easy to think that international trade and the global economy is a new phenomenon. Of course international trade has existed for centuries and was a driving force behind a great deal of man’s exploration and a major contributor to the rise of some of the most powerful empires on earth.

Most of us seldom consider the role international trade plays in our daily life. However we experience the effects of international trade with a majority of our beverages (tea, coffee, wine), foods and goods. It allows us to have a wider choice of goods and services at competitive prices, which has an overall effect of keeping prices lower.

International trade also means that we are not isolated from global events. Political and economic upheavals, natural disasters, and cultural changes can all have a direct impact on the cost of the goods we purchase and the price that products and services made in our home country command.  Even rather minor legislation (or the lack thereof,) such as steps to curb climate change in one country, can be felt economically on the global market.

As with any human pursuit there are two views on how international trade should be conducted.

One side advocates free trade. These proponents believe that a laissez-fair, non-restrictive approach is the best method. They believe that naturals laws, such as supply and demand, will result in efficiency in production without the need for laws and regulations to promote or protect trade and growth.

The other side advocates protectionism. This group feels that only regulation can ensure that markets function properly. They attempt to correct any inefficiencies in the international market through actions such as tariffs, quotas, and subsidies. Protectionism often tries to protect local industries from international competition.

Throughout history only one aspect of international trade has been consistent; it is ever-changing and evolving. Technology and to a large degree those using it are currently are the driving force behind international trade’s evolution.


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