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 basic to globalization". The Silk Road Silk Route redirects here. ... The Amber Road (in Lithuanian: Gintaro kelias; Polish: Szlak Bursztynowy, Jantarowy Szlak; in German: Bernsteinstraße; in Hungarian: Borostyán út, in Russian: Янтарный путь) was an ancient trade route for the transfer of amber. ... A KFC franchise in Kuwait. ... A multinational corporation (MNC) is a corporation or enterprise that manages production establishments or delivers services in at least two countries. ... Outsourcing became part of the business lexicon during the 1980s and refers to the delegation of non-core operations from internal production to an external entity specializing in the management of that operation. ... A KFC franchise in Kuwait. ...

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. ... Free trade is an economic concept referring to the selling of products between countries without tariffs or other trade barriers. ... Protectionism is the economic policy of restraining trade between nations, through methods such as high tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws in an attempt to protect domestic industries in a particular nation from foreign take-over... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        A trade pact is a wide ranging tax, tariff and trade... A trade bloc is a large free trade area or free trade area formed by one or more tax, tariff and trade agreements. ... Preferential Trade Area is a trading bloc which gives preferential access to certain products from certain countries. ... A free trade area is a designated group of countries that have agreed to eliminate tariffs, quotas and preferences on most (if not all) goods between them. ... A customs union is a free trade area with a Common External Tariff. ... 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. ... In economics, a monetary union is a situation where several countries have agreed to share a single currency (also known as a unitary or common currency) among them, for example, the East Caribbean dollar. ... A single market is a customs union with common policies on product regulation, and freedom of movement of all the four factors of production (land, enterprise, capital and labour). ... Also see Economic and Monetary Union of the European Union. ... Face-to-face trading interactions on the New York Stock Exchange trading floor. ... 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 a branch of economics with two main subdisciplines international trade and international finance. ...

International trade theory

Several different models have been proposed to predict patterns of trade and to analyze the effects of trade policies such as tariffs.

Ricardian model

The Ricardian model focuses on comparative advantage and is perhaps the most important concept in international trade theory. In a Ricardian model, countries specialize in producing what they produce best. Unlike other models, the Ricardian framework predicts that countries will fully specialize instead of producing a broad array of goods. Also, the Ricardian model does not directly consider factor endowments, such as the relative amounts of labor and capital within a country. 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 parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good. ... It has been suggested that Commerce be merged into this article or section. ... The word theory has a number of distinct meanings in different fields of knowledge, depending on their methodologies and the context of discussion. ...

Heckscher-Ohlin model

The Heckscher-Ohlin model was produced as an alternative to the Ricardian model of basic comparative advantage. Despite its greater complexity it did not prove much more accurate in its predictions. However from a theoretical point of view it did provide an elegant solution by incorporating the neoclassical price mechanism into international trade theory. 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. ...

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. Empirical problems with the H-O model, known as the Leontief paradox, were exposed in empirical tests by Wassily Leontief who found that the United States tended to export labor intensive goods despite having a capital abundance. Look up factor in Wiktionary, the free dictionary. ... 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. ... Leontiefs paradox in economics was the result of Professor Wassily W. Leontiefs attempt to test the Heckscher-Ohlin theory. ... Wassily Leontief (August 5, 1905, Munich, Germany – February 5, 1999, New York)[1], was an economist notable for his research on how changes in one economic sector may have an effect on other sectors. ...

Specific Factors

In this model, labour mobility between industries is possible while capital is immobile between industries in the short-run. The specific factors name refers to the given that in the short-run specific factors of production, such as physical capital, are not easily transferable between industries. The theory suggests that if there is an increase in the price of a good, the owners of the factor of production specific to that good will profit in real terms. Additionally, owners of opposing specific factors of production (i.e. labour and capital) are likely to have opposing agendas when lobbying for controls over immigration of labour. Conversely, both owners of capital and labour profit in real terms from an increase in the capital endowment. This model is ideal for particular industries. This model is ideal for understanding income distribution but awkward for discussing the pattern of trade.

Gravity model

The Gravity model of trade presents a more empirical analysis of trading patterns rather than the more theoretical models discussed above. The gravity model, in its basic form, predicts trade based on the distance between countries and the interaction of the countries' economic sizes. The model mimics the Newtonian law of gravity which also considers distance and physical size between two objects. The model has been proven to be empirically strong through econometric analysis. Other factors such as income level, diplomatic relationships between countries, and trade policies are also included in expanded versions of the model. The gravity model of trade in international economics, similar to other gravity models in social science, predicts bilateral trade flows based on the economic sizes of (often using GDP measurements) and distance between two units. ... It has been suggested that gravitation be merged into this article or section. ... Econometrics literally means economic measurement. It is the branch of economics that applies statistical methods to the empirical study of economic theories and relationships. ...

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 which led to the general decline of Great Britain. In the years since the Second World War, controversial multilateral treaties like the GATT and World Trade Organization have attempted to create a globally regulated trade structure. These trade agreements have often resulted in protest and discontent with claims of unfair trade that is not mutually beneficial. Bilateralism is a term referring to trade or political relations between two states. ... Mercantile redirects here. ... This article does not cite any references or sources. ... 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. ... The World Trade Organization (WTO), (OMC - Spanish: , French: ), is an international organization designed to supervise and liberalize international trade. ...

Free trade is usually most strongly supported by the most economically powerful nations, though they often engage in selective protectionism for those industries which are strategically important such as the protective tariffs applied to agriculture by the United States and Europe. The Netherlands and the United Kingdom were both strong advocates of free trade when they were economically dominant, today the United States, the United Kingdom, Australia and Japan are its greatest proponents. However, many other countries (such as India, China and Russia) are increasingly becoming advocates of free trade as they become more economically powerful themselves. As tariff levels fall there is also an increasing willingness to negotiate non tariff measures, including foreign direct investment, procurement and trade facilitation. The latter looks at the transaction cost associated with meeting trade and customs procedures. Protectionism is the economic policy of restraining trade between nations, through methods such as high tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws in an attempt to protect domestic industries in a particular nation from foreign take-over... This article does not cite any references or sources. ... For other uses, see Europe (disambiguation). ... Trade facilitation looks at how procedures and controls governing the movement of goods across national borders can be improved to reduce associated cost burdens and maximise efficiency while safeguarding legitimate regulatory objectives. ... In economics and related disciplines, a transaction cost is a cost incurred in making an economic exchange. ... Customs is an authority or agency in a country responsible for collecting customs duties and for controlling the flow of animals and goods (including personal effects and hazardous items) in and out of a country. ...

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. In macroeconomics, the definition of recession is a decline in any countrys Gross Domestic Product (GDP), or negative real economic growth, for two or more successive quarters of a year. ... For other uses, see The Great Depression (disambiguation). ...

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 27 independent states. The 2005 Buenos Aires talks on the planned establishment of the Free Trade Area of the Americas (FTAA) failed largely due to opposition from the populations of Latin American nations. Similar agreements such as the MAI (Multilateral Agreement on Investment) have also failed in recent years. Motto (Spanish) (Portuguese) (Guaraní) Our North is the South  â€¢  â€¢ Pro Tempore Secretariat Montevideo, Uruguay Largest city São Paulo, Brazil Official languages 3 Portuguese Spanish Guaraní Membership 5 Argentina Brazil Paraguay Uruguay Venezuela Leaders  -  Carlos Álvarez Establishment  -  Declaration of Foz do Iguaçu 30 December 1985   -  Treaty of Asunción... Nafta or NAFTA may refer to: an acronym for the North American Free Trade Agreement an acronym for the New Zealand Australia Free Trade Agreement the town/Tokyo of Nafta, Tunisia This is a disambiguation page: a list of articles associated with the same title. ... Mai can refer to: As a name: Mai, old French for Maia, the Italic goddess of spring, the daughter of Faunus, and wife of Vulcan. ... This article or section does not cite its references or sources. ...

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
• 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

“Sovereign” redirects here. ...

See also

• Absolute advantage
• American trade
• Balance of trade
• Borderless Selling
• Comparative advantage
• Customs union
• Ecological Economics
• Economics
• Export
• Free trade
• Free trade area
• Gravity model of trade
• Import (international trade)
• International trade law
• List of countries by imports
• List of countries by exports
• List of international trade topics
• List of economists
• Most favoured nation clause
• OPEC
• Political risk
• Protectionism
• Single Window System
• Trade bloc
• Trade of Japan

A country has an absolute advantage economically over another, in a particular good, when it can produce that good more efficiently. ... American Trade, the trade that the United States has with foreign nations or within itself. ... The balance of trade encompasses the activity of exports and imports, like the work of this cargo ship going through the Panama Canal. ... Borderless Selling is the process of selling services to clients outside the country of origin of services through modern methods which eliminate the actions specifically designed to hinder international trade. ... In economics, the theory of comparative advantage explains why it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good. ... A customs union is a free trade area with a Common External Tariff. ... Ecological economics is a transdisciplinary field of academic research that addresses the dynamic and spatial interdependence between human economies and natural ecosystems. ... Face-to-face trading interactions on the New York Stock Exchange trading floor. ... Free trade is an economic concept referring to the selling of products between countries without tariffs or other trade barriers. ... A free trade area is a designated group of countries that have agreed to eliminate tariffs, quotas and preferences on most (if not all) goods between them. ... The gravity model of trade in international economics, similar to other gravity models in social science, predicts bilateral trade flows based on the economic sizes of (often using GDP measurements) and distance between two units. ... In economics, an import is any good or commodity, brought into one country from another country in a legitimate fashion, typically for use in trade. ... This article does not cite any references or sources. ... Map of countries by imports This is a list of countries by imports, mostly based on The World Factbook [1] accessed in October 2005. ... Map of amount of exports per country This is a list of countries by exports, mostly based on The World Factbook [1] accessed in February 2006. ... International trade - an overview Absolute advantage Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) APEC Autarky Balance of trade barter Bilateral Investment Treaty (BIT) Bimetallism branch plant Bretton Woods Conference Bretton Woods system British timber trade Cash crop Comparative advantage Continental trading bloc Cost, insurance and freight Currency... This is an alphabetical list of notable economists. ... Most favoured nation (or most favored nation, MFN) is a term used in international trade. ... Not to be confused with APEC. OPEC Logo The Organization of the Petroleum Exporting Countries (OPEC) is an international cartel[1][2] made up of Iraq, Indonesia, Iran, Kuwait, Libya, Angola, Algeria, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. ... Political risk is a broad term to collectively describe the risks companies and investors face due to the exercise of political power. ... Protectionism is the economic policy of restraining trade between nations, through methods such as high tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws in an attempt to protect domestic industries in a particular nation from foreign take-over... There are very few or no other articles that link to this one. ... A trade bloc is a large free trade area or free trade area formed by one or more tax, tariff and trade agreements. ... This article or section needs to be updated. ...

External links

• Freetrade.org
• International Trade Centre
• Interactive Ricardian Model Simulator
• Consumers for World Trade Education Fund electronic trade library
• FITA's Really Useful Links for International Trade

Data

• World Bank's Trade and Production Database
• Resources for data on trade, including the gravity model
• European Union Trade Data
• Agricultural Trade Data by FAO
• Brazilian Trade Data
• India Trade Data