International Trade

Since the dawn of civilization and even before that trade has been a central activity in the world markets. There were times when there was no currency and people used to exchange commodities with commodities – a system well known as Barter. Different regions of the world are rich in different resources and all that is traded is ‘comparative advantage’ as a matter of fact whether it is a product, service or capital. Those who are specialized in producing one type of commodity trade it with the other market; this is how trade is characterized. Depending upon the number of traders a trade may be termed as bilateral or multilateral.

Today when we talk about trade, what we actually mean in international trade. Whether it’s about buying a pair of imported leather shoes or cosmetics, medicines or grocery items; some way or the other we are touched by international trade. Globalization, industrial revolution, advancement in technology, fast means of transportation and communication has made it a seamless task to trade across the borders; diversification and a search for low cost raw material and low wages labor being the driving forces. The phenomenon has got high momentum in recent centuries for its impact on the economy of a country that in turn defines its power. This can be understood by the fact that the major sanction on a nation is usually in the form of economic sanctions characterized by a boycott of trade with that country.

Every country has its trade policy that changes over times to facilitate the trade as per new set of circumstances. Trade policies are characterized by certain restrictions from the government, duties, subsidies and quotas – a policy termed as protectionism which is mainly to promote its home industries but such trade barriers may affect the world economy on the whole. That is the reason most of the trade organizations and unions support free trade. Experts believe protectionism as one of the major reasons for the collapse of economies.

International trade organizations that support free trade include European Common Market, G8, GATT (General Agreement on Tariffs and Trade), WTO (World Trade Organization), IMF (International Monetary Funds) and OPEC (Organization of the Petroleum Exporting Countries) whereas European Free Trade Association, Free Trade Area of the Americas, North American Free Trade Agreement, Union of South American Nations and South Asian Free Trade Association are some of the free trade agreements that define free trade areas or regions today.

Free trade these days is facing the challenge of recession. During recession as the country’s home industries are declining so there is huge pressure on the government to promote local industries by imposing certain trade barriers like fixing the quotas and imposing duties and taxes on the imports that though helps the country flourish but restricts consumer choices and also hinders global economy overall.