What is International Trade
It is an exchange of goods and services between countries. This kind of trade gives rise to world economy, in which prices, demand and supply affect and will be affected globally. Any kind of political changes in Asia, for example could cause an increase in the cost of labor, thereby increasing the manufacturing cost for any British or American company which is based in any part of Asia. A decrease in the cost of labor, on the other hand would result in paying less.
Trading globally gives an opportunity for other countries to buy and sell goods that are not available in their own country. Since every kind of product can be found in the international market for example food, clothing, stocks, currencies etc. not only goods but also as mentioned early services are also traded globally like banking, tourism, consulting etc. a product that is sold to the global market is an export and that which is bought from the global market is called import. These are accounted for in a country’s current account in the Balance of Payments.
Now let’s see the advantages of International Trade
- It enhances your domestic competitiveness
- Increases your sales and profits
- The country gains its global market share
- Dependency on existing markets is reduced.
- Exploits international trade technology
- Extends sales potential of existing products.
International trade also has its own disadvantage
- Need to wait for long term gains
- Modify the product or packaging
- Develop new promotional material
- Country incurs additional administrative costs
- Dedicate personnel for travelling
Let’s sneak into our India’s international trade policy. The main objective of our policy has been to protect its market from foreign competitors. Till 1980’s India was not interested in exporting its goods and services to other countries. The aim of its economic policy was to ensure the country’s independent development also known as the SWADESHI PRINCIPLE. At the end of 80’s India was one of the most closed economies across the global. Its bilateral trade policy, heavily twisted towards the former communist countries, was full of grand statements about technology transfer.
India was a founding member of the GATT (General Agreements on Tariffs and Trade) in 1947 and of the World Trade Organization (WTO) in 1995. In many ways it is still influenced by its policy of non- aligned. GATT principles accord with India’s desire to be treated equally, while defending the situation of developing countries. India was left out of the Asian Economic Boom with the Soviet unions collapse and the first gulf war, as well as the implementation of the International Monetary Fund’s structural Adjustment Program. It was only then India launched a new policy of privatization, de regulation and a multi faceted trade policy. Thus it shows where India market has groomed from in today’s global trade.