Trading over the world has dated back to at least 9,000 years ago. Although it may have gone much further back with the trading of animals and the invention of ships, now-a-days international trading is one of the major parts of the global economy. It is the main reason for the development of this much industrialized world. Trading happens when countries do not have the resources to satisfy both theirs and the consumers’ needs and wants. Countries produce a surplus by exploiting their scarce domestic resources needed. Goods and services are imported and exported for several reasons. For instance, imports could be cheaper than domestic good or even better quality. They may look more appealing to the producers and consumers eyes or they might be more available. Although, in many countries the main reason they trade is because there are no local alternatives to produce with. Trading Restrictions
A country may have restrictions because they want to protect its domestic supply so they restrict the imports/exports by imposing tariffs on imports so that they become less desirable as they are more expensive and this creates the consumer demand to switch to domestic production. It could be just to help their own economy and to allow its domestic "infant" industry to grow into full industries. Another reason for restrictions on trade is to maintain its balance of trade even because the country might be spending too much on imports and not exporting enough creating a deficit in the balance of trade. Principles of Trade
There are two fundamental principles as to why countries need to trade; they are the division of labour and specialisation. Division of production
This is where production is broken down into small, tiny, tasks and then allocating these tasks to different workers based on who can finish it efficiently and effectively. When put into an international manner, it means that countries produce a small amount of goods and services where they may put some...
Please join StudyMode to read the full document