Domestic vs International Trade

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Domestic Vs International Trade

Mohammad Tariqul Islam

Domestic Trade:

Trade among parties in the same country.

Domestic trade is the exchange of goods, services, or both within the confines of a national territory. They are always aimed at a single market. It always deal with only one set of competitive, economic, and market issues. The trading is always with a single set of customers all the time, though the company may have several segments in a market. Finally local trade or home trade or Domestic trade may be sub-divided into Wholesale trade, and Retail trade.

International Trade:

Trade among parties residing in different countries.

International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product (GDP). While international trade has been present throughout much of history, its economic, social, and political importance has been on the rise in recent centuries.

Some difference between International trade and local or domestic trade

International trade is in principle not different from domestic trade as the motivation and the behavior of parties involved in a trade do not change fundamentally regardless of whether trade is across a border or not. The main difference is that international trade is typically more costly than domestic trade. The reason is that a border typically imposes additional costs such as tariffs, time costs due to border delays and costs associated with country differences such as language, the legal system or culture.

Another difference between domestic and international trade is that factors of production such as capital and labour are typically more mobile within a country than across countries. Thus international trade is mostly restricted to trade in goods and services, and only to a lesser extent to trade in capital, labor or other factors of production.

Advantages and Disadvantages of international Trade

Advantage of international trade

• Monetary gains to the respective country indulging in trade. • More variety of goods available for consumers.
• Better quality of goods.
• Competition both at the international level as well as local level. • Closer ties between nations.
• More exchange of technical know-how.
• Local producers will try to improve the quality of their products. • Increase in employment locally.
Disadvantage of international trade

• Local production may suffer
• Local industries may be overshadowed by their international competitors • Rich countries may influence political matters in other countries and gain control over weaker nations. • Ideological differences may emerge between nations with regard to the procedures in trade practices. International trade is beneficial to world economy. It adds to the money coffers of the world at large. Every country can benefit monetarily if it is able to dispose off its surplus goods after meeting the requirements of the local people.

Key differences:

• International trade is, in principle, not different from domestic trade as the motivation and the behavior of parties involved in a trade do not change fundamentally regardless of whether trade is across a border or not.

• The main difference is that international trade is typically more costly than domestic trade. The reason is that a border typically imposes additional costs such as tariffs, time costs due to border delays and costs associated with country differences such as language, the legal system or culture.

• Another difference between domestic and international trade is that factors of production such as capital and labor are typically more mobile within a country than across countries.

• Thus international trade is mostly restricted to trade in goods and services, and only to a lesser extent to trade...
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