International trade - what is it? Definition, functions and types

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Human society is unthinkable without international or global trade. It is historically the first form of economic relations between different countries. In this regard, international trade is trading settlements and fairs, the activities of which have been known since time immemorial.

Currently, she plays an equally important role. The modern definition says that international trade is a special kind of commodity-money relations based on the export of raw materials or finished products.

It is based on the division of labor. Simply put, countries produce a certain commodity, which they, entering into cooperation, exchange. Therefore, we can safely say that at present international trade is the interchange of national economies of the states of the world in goods and services.

Factors stimulating the progress of the international division of labor:

- socio-geographical: difference in topographical position, number and mental characteristics of the population;

- natural and climatic: differences in the provision of water and forest resources, as well as minerals.

Also importantadvanced technologies and changes in economic indicators play a role. All this contributes to a strong relationship between national economies.

Production grows slower than international trade. This is confirmed by the data of the World Trade Organization. According to her research, for every 10% increase in output, there is a 16% increase in world trade.

Organization of international trade is impossible without such a thing as "foreign trade". It is divided into: trade in finished products, equipment, raw materials and services.

In a narrow sense, international trade is the total turnover of developed countries, developing countries, goods circulation of countries of any continent or region.

As practice shows, a country's interest in world trade is due to the following advantages:

- joining the world achievements;

- rational use of available resources;

- the ability to rebuild the structure of the economy as soon as possible;

- meeting the needs of the population.

There are different types of international trade:

- trade in goods and services;

- exchange trading;

- fairs;

- auctions;

- countertrade;

- back-to-back trading.

If everything is very clear with goods and services, then the rest of the points make you think, so to fully understand the picture, let's look at this issue in more detail.

So, a trading exchange is an association of sellers, intermediaries and buyers. Such alliances contribute to the improvement of trade, the acceleration of trade and free pricing.

Fairs are auctions held periodically in a designated place. They are regional, international and local. During this period of time, exhibitions-fairs were widely used, where you can order your favorite product.

Auctions are a form of selling goods that were previously put up for review. Such transactions take place at the appointed time in a strictly defined place. A distinctive feature of auctions is limited liability for the quality of the goods.

Countertrade takes place in several directions: barter and counterpurchase.

Barter is an exchange of goods agreed upon in value. Such transactions take place without the participation of funds.

The last type of international trade is an offset transaction, which differs from barter in that it involves not one, but several goods.

Thus, world trade is carried out in several types of transactions, which are developing and improving every minute.