What is international trade?

We explain what international trade is, its importance, advantages and other characteristics. In addition, differences with foreign trade.

  1. What is international trade?

When we talk about foreign trade, international trade or world trade, we refer to the set of economic transactions that involve the exchange of goods and services between different countries and their respective internal markets.

This exchange allows products to travel and position themselves in other regions, reaching new consumers . Along the way, it also generates an important currency exchange .

In the world, most countries participate in one way or another of international trade , either as sellers (exporters) or buyers (importers) in some way or another, for which they have “open” economies .

This opening began during the second half of the twentieth century and especially in the 1990s, thanks to the incorporation of Latin American nations, major suppliers of raw materials . In parallel, the Asian and Eastern European markets were also opened.

This phenomenon of globalization of the economy has allowed foreign trade to grow in volume and importance, as it significantly affects internal or local trade (internal borders).

  1. Characteristics of international trade

International trade, involving not individuals or entities, but entire countries, always occurs in international currencies (hard currencies, such as the US dollar) and according to a fixed set of rules that determine the countries involved.

Some nations, for example, protect their own industries from foreign products through tariff barriers, that is, import taxes, to make foreign products more expensive and prevent them from competing with locals. But not everyone has the same relationship with imports, and some countries encourage more foreign-dependent consumption than others .

The balance of payments of a country compares the financial volume imported with the exported , determining how autonomous a nation is commercially. If it exports more than it matters, it enjoys an advantageous commercial position with other nations, while if it imports more than it exports, it faces the international market in a weaker position.

  1. Importance of international trade

International trade promotes the productive development of the participating nations.

Since its emergence and massification on a planetary scale, international trade has only grown in importance. On the one hand, because the volume of money and goods that it mobilizes is enormous , thus promoting the productive development of nations and allowing others to obtain goods and services that cannot provide themselves.

But on the other hand, the commercial relationship of the countries dictates an important portion of their diplomatic relations . Consequently, it is usual to associate economic measures and global cycles of capitalism with the outbreak of wars and tensions between the various hegemonic powers of the world.

  1. Advantages of international trade

The possibility of buying goods and services produced abroad involves certain indisputable advantages. For example, access to products of international quality , made in industrialized countries that would otherwise be impossible to have, allows less technologically advanced nations to access innovations.

In addition, this type of exchange encourages regional specialization , so that countries can enter into competition with what is best given to them, and thus lead a certain sector of international trade, however small.

Finally, by diversifying the risk, international trade allows diverse inflows of money to be obtained. In other words, countries do not depend entirely on the domestic market . Although the latter is also a double-edged sword, it implies a high degree of dependence on the outside.

  1. Difference with foreign trade

commercial law
International trade and foreign trade, how are they different?

This difference is really about the breadth with which we think both concepts, since they are generally considered synonyms. Thus, when we talk about international trade, we generally refer to all the commercial transactions that occur between countries, that is, from a joint perspective.

On the contrary, when talking about foreign trade, we assume ourselves within a nation , and we refer to those activities that said country trades abroad, that is, that it exports to other countries.

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