Introduction

International trade is the exchange of capital, goods, and services across international

borders or territories. In most countries, such trade represents a significant share of gross

domestic product (GDP). While international trade has been present throughout much of

history (see Silk Road, Amber Road), its economic, social, and political importance has

been on the rise in recent centuries. It is the presupposition of international trade that a

sufficient level of geopolitical peace and stability are prevailing in order to allow for the

peaceful exchange of trade and commerce to take place between nations

Industrialization, advanced in technology 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. 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 labor 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. 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

that factor of production and thus embody it. An example is the import of labor-intensive

goods by the United States from China. Instead of importing Chinese labor, the United

States imports goods that were produced with Chinese labor.

Objectives of the study

To Study likely trends in world trade and how current and future economic, social

and political factors might weigh on these trends.

To discuss trends in international trade in goods and services and various

components within these sectors

To understand the role and contribution of international trade in the global

economy

Methods of Research

This data has been collected by secondary sources such as Books, News Papers,

Google Search, Magazines and e-data.

Significance of the study

The significance of the study includes that why international trade is important in

today world

The buying and selling of goods and services across national borders is known as

international trade. International trade is the backbone of our modern, commercial

world, as producers in various nations try to profit from an expanded market, rather

than be limited to selling within their own borders. There are many reasons that trade

across national borders occurs, including lower production costs in one region versus

another, specialized industries, lack or surplus of natural resources and consumer

tastes. One of the most controversial components of international trade today is the

lower production costs of "developing" nations. There is currently a great deal of

concern over jobs being taken away from the United States, member countries of the

European Union and other "developed" nations as countries such as China, Korea,

India, Indonesia and others produce goods and services at much lower costs.  Both the

United States and the European Union have imposed severe restrictions on imports

from Asian nations to try to stem this tide.  Clearly, a company that can pay its

workers the equivalent of dollars a day, as compared to dollars an hour, has a distinct

selling advantage.  Nevertheless, American and European consumers are only too

happy to lower their costs of living by taking advantage of cheaper, imported goods

Even though many consumers prefer to buy less expensive goods, some international

trade is fostered by a specialized industry that has developed due to national talent

and/or tradition.  Swiss watches, for example, will never be price-competitive with

mass produced watches from Asia. Regardless, there is a strong market among certain

consumer groups for the quality, endurance and even "snob appeal" that owning a

Rolex, Patek-Philippe or Audemars Piguet offers.  German cutlery, English bone

China, Scottish wool, fine French silks such as Hermes and other such products

always find their way onto the international trade scene because consumers in many

parts of the world are willing to foster the importation of these goods to satisfy their

concept that certain countries are the best at making certain goods.

One of the biggest components of international trade, both in terms of volume and

value of goods is oil.  Total net oil imports in 2005 are over 26 million barrels per day

(U.S. Energy Information Administration figures) (Note: Imports include crude oil,

natural gas liquids, and refined products.) At a recent average of $50 per barrel, that

translates to $1billion, three hundred million, PER DAY. The natural resources of a

handful of nations, most notably the nations of OPEC, the Organization of Petroleum

Exporting Countries, are swept onto the international trade scene in staggering

numbers each day, and consumer nations continue to absorb this flow. Other natural

resources contribute to the movement of international trade, but none to the extent of

the oil trade. Diamonds from Africa, both for industrial and jewelry use, wheat and

other agricultural products from the United States and Australia, coal and steel from

Canada and Russia, all flow across borders from these nations that have the natural

resources to the nations that lack them.

Chapter Scheme   

This study consists of the following chapters:

Chapter 1: Introduction

Chapter 2: International Trade

Chapter 3: Trends and recent trend in International Trade

Chapter 4: Conclusion

Chapter 2: International trade

Definition and Conceptual Framework

Global trade, also known as international trade, is simply the exchange of goods and

services across international boundaries.

Global trade involves the export and import of goods and services between

international borders. Goods and services that enter into a country for sale are called

imports. Goods and services that leave a country for sale in another country are called

exports. For example, a country may import wheat because it doesn't have much arable

land but export oil because it has oil in abundance.

A fundamental concept underlying global trade is the concept of comparative

advantage developed by David Ricardo in the 19th century. In a nutshell, the doctrine

of comparative advantage states that a country can produce some goods or services

more cheaply than other countries. In technical terms, the country is able to produce a

specific good or service at a lower opportunity cost than others.

An opportunity cost is the benefit one gives up in making an economic choice. The

classic example is 'guns and butter' - domestic investment over defense spending. The

more guns you produce, the less funds are available to invest in public schools and

infrastructure, for example. The more you invest in the domestic economy, the less you

can spend on defense.

Advantages of International Trade

The fundamental reason for international trade is to sell something that we don’t need and

to buy something we do need. Trade creates jobs, attracts investments, attracts new

technology and materials, and offers Canadians a wider choice in products and services.

People spend, save, or pay taxes with the money they earn in their jobs. The government

uses taxes to provide services, which creates more jobs. When people save, the capital

markets lend money to others, who will spend it on consumer goods, or open or expand a

business, therefore creating new jobs. When people spend money, it creates demand,

which creates new jobs.

If something occurs to slow this expansion, the cycle reverses. Ex. higher taxes, higher

interest rates.

Meeting our needs

Trade is always balanced if it is fair. If 2 people trade baseball cards and one gives

another 6 cards, they should get 6 back.

Many businesses can create a surplus inventory of goods and services. Canadian farms

produce more food than Canadians can eat, Canadian manufacturers make more products

than Canadians use, and Canadian service providers can provide service to other

countries.

Canadians cannot produce fruits like bananas and oranges, and some products we cannot

make. These products are imported. Both trading partners get something they need by

trading something they don’t need.

Job Creation

Unlike the battering that used to go on between trading partners, now businesses receive

money from selling their products or services to foreign businesses. When foreign

businesses buy Canadian products it creates jobs for Canadians. Exports are very

important to Canadians they create one out of three Canadian jobs. 40 percent of what

Canadians produce is exported. 1 billion exports means 6000 jobs for Canadians. When

trade is balanced businesses remain profitable and may grow.

Attracting Investment

Investment follows trade. Many foreign companies will invest in an office, factory, or

distribution warehouse to simplify their trade and reduce cost. This investment also

creates more jobs. It also attracts international investors.

New Technology & Materials

New technology promotes competitiveness and profitability. If a business could create a

machine that works better, faster, or cheaper (or all three), then the business will have

produced a more competitive product for national and international markets. The

biotechnology industry in Canada is second only to the U.S.

Disadvantages of Global Trade

The Global market has made it easy to buy and sell international goods. While this has

benefits, it also presents a problem. Such trade can cause countries to be prosperous for a

short time, but leads to economic exploitation, loss of cultural identity, and even physical

harm.

Support of Non-Democratic Systems

Great hardship can be caused when people make poor decisions about land use or surplus

production for export and do not take the general population’s welfare into consideration.

For example: Landowners in Nicaragua and El Salvador want farmers to grow coffee

beans because it is a very profitable cash crop, however, the farmers would like to use the

land to grow more food for their families. The farmer’s wishes are ignored because they

do not actually own the land.

Cultural Identity Issues

Culture is a major export in the world. It displays and promotes values and lifestyles

worldwide. The "culture consumer" in other countries is sometimes overwhelmed by

American ideas. Products also carry cultural ideas and messages. There are values of the

culture the make the product.

For example: Coca-Cola, McDonalds, Nike, and Microsoft all sell products that

symbolize American values and symbolize and reflect American corporate culture.

Social Welfare Issues:

Maintaining safety standards, minimum wages, worker’s compensation and Health

benefits are all social welfare issues that cost business money. If a running shoe is made

in a country where these issues are not met than the shoe can be sold for less in Canada.

The down side to this is that substandard safety conditions cause death and injury in the

workplace.

Environmental Issues:

In Canada, businesses are urged by the government and environmental groups through

laws and regulations to keep our air, land and water clean. This is a costly process so

businesses decide to move their operations to countries; i.e. Mexico, where it is less

regulated.

Political Issues:

Precious commodities such as gold, diamond, oil or farmland are so important for

countries to have control that wars have been started and as a result people are killed.

Trade of these items has caused political alliances that do not help the people in the

trading nation but only the powerful corporations that control the co