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International trade is the exchange of goods and services across international boundaries or territories. In most countries, it represents a significant share of GDP. While international trade has been present throughout much of history (see Silk Road, Amber Road), its economic, social, and political importance has been on the rise in recent centuries. Industrialization, advanced transportation, globalization, multinational corporations, and outsourcing are all having a major impact. Increasing international trade is the usually primary meaning of "globalization". The Silk Road (Traditional Chinese: 絲綢之路; Simplified Chinese: ä¸ç»¸ä¹‹è·¯; pinyin: sÄ« chóu zhÄ« lù, Persian راه ابریشم Râh-e Abrisham, Turkish: Ä°pekyolu, Kyrgyz: Jibek Jolu,) was an interconnected series of routes through Southern Asia traversed by caravan and ocean vessel, and connecting Changan (todays Xian), China, with Antioch, Asia...
The Amber Road (in Lithuanian: Gintaro kelias; Polish: Szlak Bursztynowy, Jantarowy Szlak; in German: Bernsteinstraße; in Russian: Янтарный путь) was an ancient trade route for the transfer of amber. ...
Globalization is the term used to describe the changes in societies and the world economy that result from dramatically increased international trade and cultural exchange. ...
A multinational corporation (MNC) or multinational enterprise (MNE) or transnational corporation (TNC) is an corporation/enterprise that manages production establishments located in at least two countries. ...
Outsourcing (or contracting out) is often defined as the delegation of non-core operations or jobs from internal production within a business to an external entity (such as a subcontractor) that specializes in that operation. ...
Globalization is the term used to describe the changes in societies and the world economy that result from dramatically increased international trade and cultural exchange. ...
International trade is also a branch of economics, which, together with international finance, forms the larger branch of international economics. The history of international trade chronicles the way that the flow of trade over long distances has shaped, and been shaped by history. ...
A trade bloc is a large free trade area or near-free trade area formed by one or more tax, tariff and trade agreements. ...
A free trade area is a designate group of countries that have agreed to eliminate tariffs, quotas and preferences on most goods between them. ...
A customs union is a free trade area with a Common External Tariff. ...
A single market, also referred to as a Common Market, is a customs union with common policies on product regulation, and freedom of movement of all the factors of production (goods, services, capital and labour). ...
This article covers the general information on the topic. ...
Trade creation is an economic term related to international economics in which trade is created by the formation of a customs union. ...
Trade diversion is an economic term related to international economics in which trade is diverted by the formation of a customs union. ...
Economics (from the Greek [oikos], house, and [nomos], rule, hence household management) is a social science that studies the production, distribution, trade and consumption of goods and services. ...
International finance is the branch of economics that studies the dynamics of exchange rates, foreign investment, and how these affect international trade. ...
International economics is the branch of economics relating to ideas such as International trade, Foreign Direct Investment (FDI), and the exchange rate and how they influence one another. ...
International trade theory
Ricardian model The Ricardian model is the theory of comparative advantage and is perhaps the most important concept in international trade theory. Ricardian economics is an economic model of international trade introduced by David Ricardo to explain the pattern and the gains from trade in terms of comparative advantage. ...
In economics, the theory of comparative advantage explains why it can be beneficial for two countries to trade, even though one of them may be able to produce every kind of item more cheaply than the other. ...
A fruit stand at a market. ...
Theory has a number of distinct meanings in different fields of knowledge, depending on the context and their methodologies. ...
Heckscher-Ohlin model The Heckscher-Ohlin model was produced as an alternative to the Ricardian model of basic comparative advantage. Despite its more complex and accurate predictive power, it also had an ideological mission: the elimination of the labor theory of value and the incorporation of the neoclassical price mechanism into international trade theory. The theory argues that the pattern of international trade is determined by differences in factor endowments. It predicts that countries will export those goods that make intensive use of locally abundant factors and will import goods that make intensive use of factors that are locally scarce. The Heckscher-Ohlin model (H-O model) is a general equilibrium mathematical model of international trade, developed by Eli Heckscher and Bertil Ohlin at the Stockholm School of Economics. ...
An ideology is a collection of ideas. ...
A factor can be: a person acting as a mercantile agent, or, in Scotland, a Factor is a person who manages property on behalf of the owner; in mathematics, a multiplicative factor is a synonym for coefficient a number that is a divisor of another number; thus, factorization is to...
Endowment can refer to: Financial endowment Endowment (Mormonism) This is a disambiguation page — a navigational aid which lists other pages that might otherwise share the same title. ...
A good in economics is any physical object (natural or man-made) or service that, upon consumption, increases utility, and therefore can be sold at a price in a market. ...
Specific Factors
Regulation of international trade Traditionally trade was regulated through bilateral treaties between two nations. For centuries under the belief in Mercantilism most nations had high tariffs and many restrictions on international trade. In the 19th century, especially in Britain, a belief in free trade became paramount and this view has dominated thinking among western nations for most of the time since then. In the years since the Second World War multilateral treaties like the GATT and World Trade Organization have attempted to create a globally regulated trade structure. Bilateralism is a term referring to trade or political relations between two states. ...
A painting of a French seaport from 1638, at the height of mercantilism. ...
A tariff is a tax on imported goods. ...
Free trade is an economic concept referring to the selling of products between countries without tariffs or other trade barriers. ...
Mushroom cloud from the nuclear explosion over Nagasaki rising 18 km into the air. ...
Multilateralism is an international relations term that refers to multiple countries working in concert. ...
General Agreement on Tariffs and Trade (usually abbreviated GATT) functions as the foundation of the WTO trading system, and remains in force, although the 1995 Agreement contains an updated version of it to replace the original 1947 one. ...
WTO Logo The World Trade Organization (WTO) is an international, multilateral organization which sets the rules for the global trading system and resolves disputes between its member states, all of whom are signatories to its about 30 agreements. ...
Communist and socialist nations often believe in autarky, a complete lack of international trade. Fascist and other authoritarian governments have also placed great emphasis on self-sufficiency. No nation can meet all of its people's needs, however, and every state engages in at least some trade. Communism - Wikipedia /**/ @import /w/skins-1. ...
The color red and particularly the red flag are traditional symbols of Socialism. ...
An autarky is an economy that does no trade with the outside world, or an ecosystem not affected by influences from its outside, and relies entirely on its own resources. ...
Fascism (in Italian, fascismo), capitalized, was the authoritarian political movement which ruled Italy from 1922 to 1943 under the leadership of Benito Mussolini. ...
Autonomy is the condition of something that does not depend on anything else. ...
Free trade is usually most strongly supported by the most economically powerful nation in the world. The Netherlands and the United Kingdom were both strong advocates of free trade when they were on top, today the United States, the United Kingdom and Japan are its greatest proponents. However, many other countries - including several rapidly developing nations such as India, China and Russia - are also becoming advocates of free trade.
Traditionally agricultural interests are usually in favour of free trade while manufacturing sectors often support protectionism. This has changed somewhat in recent years, however. In fact, agricultural lobbies, particularly in the United States, Europe and Japan, are chiefly responsible for particular rules in the major international trade treaties which allow for more protectionist measures in agriculture than for most other goods and services.
During recessions there is often strong domestic pressure to increase tariffs to protect domestic industries. This occurred around the world during the Great Depression leading to a collapse in world trade that many believe seriously deepened the depression. A recession is usually defined in macroeconomics as a fall of a countrys real Gross Domestic Product in two or more successive quarters of a year. ...
The Great Depression was a massive global economic recession (or depression) that ran from 1929 to approximately 1939. ...
The regulation of international trade is done through the World Trade Organization at the global level, and through several other regional arrangements such as MERCOSUR in South America, NAFTA between the United States, Canada and Mexico, and the European Union between 25 independent states. There is also the newly established Free Trade Area of the Americas (FTAA), which provides common standards for almost all countries in the American continent.
Risks in international trade The risks that exist in international trade can be divided into two major groups:
Economic risks - Risk of insolvency of the buyer,
- Risk of protracted default - the failure of the buyer to pay the amount due within six months after the due date, and
- Risk of non-acceptance
- Surrendering economic sovereignty
Political risks - Risk of cancellation or non-renewal of export or import licences
- War risks
- Risk of expropriation or confiscation of the importer's company
- Risk of the imposition of an import ban after the shipment of the goods
- Transfer risk - imposition of exchange controls by the importer's country or foreign currency shortages
- Surrendering political sovereignty
- International trade de-humunizes the economy.
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