International trade is exchange of capital, goods, and services across international borders or territories. In most countries, it 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. Industrialization, advanced transportation, globalization, multinational corporations, and outsourcing are all having a major impact on the international trade system. Increasing international trade is crucial to the continuance of globalization. Without international trade, nations would be limited to the goods and services produced within their own borders. Difference between International and 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. Then trade in goods and services can serve as a substitute for trade in factors of production. Instead of importing a factor of production, a country can import goods that make intensive use of the factor of production and are thus embodying the respective factor. An example is the import of labor-intensive goods by the United States from China. Instead of importing Chinese labor the United States is importing goods from China that were produced with Chinese labor. Gains from International Trade
•International trade leads to mutual gain because it allows each country to specialize in the production of those things that it does best. •Trade permits each country to use more of its resources to produce those goods that it can produce at a relatively low cost. •With trade, it is made possible for the trading partners to consume a bundle of goods that it would be impossible for them to produce domestically. •Trade encourages competition & efficiency.
Top Trading Nations
Rank Country Exports + Imports Date of
- European Union (Extra-EU27)
1 United States
2 People's Republic of China
6 United Kingdom
- Hong Kong
9 South Korea
20 United Arab Emirates
Top Traded Commodities (Exports)
Rank Commodity Value in US$('000) Date of
1Mineral fuels, oils, distillation products, etc$1,658,851,4562009 2Electrical, electronic equipment$1,605,700,8642009
3Machinery, nuclear reactors, boilers, etc$1,520,199,6802009 4Vehicles other...