Trade refers to the buying and selling of goods and services. The goods that are exchanged are those that people make or grow, such as machines, food items, clothes, etc. Services denotes to things that people do for others, like teaching, working in companies, etc.
We trade to fulfil our needs, requirements and to make money. People also trade for the services that they cannot do themselves. Trade between nations happens for this reason only. Some nations, for example, have some natural resources, like oil, coal, or wood which other nations might want to purchase. The countries try to sell the things or services that they have a lot to other countries. In return, they make money and then buy the goods that they themselves don’t have.
Both consumers and producers make a profit from international trade. There are many nations that have a lot of different products to export, and on the other hand, there are nations that depend only on one or two goods to make money. For example, countries of the Middle East mainly depend on the oil business, because it is the only commodity they have. Similarly, countries in Africa depend majorly on the business of tropical farm products to make money.
It is shocking to know that every year products and services valued about 11 trillion dollars are traded globally. The biggest exporting countries are France, UK, Canada, USA and Japan. If a nation exports more than it imports, it is called as a trade surplus. On the flip side, if a nation pays more for its imports it has a trade shortfall.
In some countries the government regulates all trading activities, while in others, the government allows organizations to trade freely. Many governments try to boost domestic production by restricting imports. They levy high import duties on imported goods to make them costlier when compare to their own produce. A government may also put restrictions on the products to be imported. This strategy is called as protectionism because governments want to protect their economies.
The advantages of international trade have been the major contributors of growth for the country’s economy. Countries with good international trading strategy have accumulated wealth and dominated the global economy. The international trade can become one of the major drivers to the reduction of poverty.
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