Some Facts to Know Regarding International Trade
The international trade may be broadly termed as the exchange of services and goods between two countries or international boundaries. The trade of nations occurred in the ancient times. Usually, the international trade has this significant influence in knowing the socio-economic, political and cultural scenario of a country.
The international trade of countries can be influenced through the bilateral relations of the countries. On the early times, the international trade was regulated and also was under the influence of high tariffs. During this period, countries adopted the policy of mercantilism that is the inflow of the capital determined the prosperity of the nation. However, with globalization and industrialization during the 19th century, these regulations got relaxed and there was the adoption of free trade. Through this model, the trade isn’t regulated by any type of government-imposed restrictions including taxes as well as tariffs. All of the developed as well as economically powerful nations that include the US, the whole Europe and the UK have been actually 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. In this model, geographical distance of countries and also the economic sizes are actually considered when coming up with an analysis.
In the current scenario, the international trade is made by the guidelines which were established by the WTO or the World Trade Organization. However, the trade between the two countries is also influenced by the economic treaties among the countries. There are such agreements including the NAFTA between countries.
Despite of the regulations which are actually involved in the process, the international trade gives various potential risks at the economic as well as the political fronts. There are some that include the cancellation of international export or import licenses, the risks which are being involved to war and also the risk of imposing a ban on those imported products after the shipment of consignment and currency exchange controls.
Due to the international trade, you are allowed to expand such markets for the services and goods that may not be available. This is the main reason why you would choose between Japanese, American or the German car. Because of international trade, the market has greater competition and this means there are more competitive costs that brings a much cheaper product home to the consumer. The international trade offers such rise in the world economy wherein the costs of the supply and the demand would affect and also get affected by those global events.