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Some Facts to Know Regarding International Trade

The international trade may be broadly termed as the exchange of services and goods between two countries or international boundaries. The trade of nations occurred in the ancient times. Often, the international trade had such significant influence in finding out the socio-economic, cultural and political scenario of a country.

The international trade between countries is influenced by such existing bilateral relations of the nations. In the early times, the international trade had been regulated and was also influenced by the huge tariffs. On this period, the countries primarily adopted the policy of mercantilism in which the inflow of the capital determined the nation’s prosperity. However, with globalization and industrialization during the 19th century, these regulations got relaxed and there was the adoption of free trade. Through this model, the trade isn’t regulated by any type of government-imposed restrictions including taxes as well as tariffs. The developed and also economically-powerful nations which include the United States, Europe and UK have been the strongest advocates of this policy.

There are many theories which are in practice for such purpose of knowing the tariffs as well as the patterns of the international trade. However, the gravity model of the trade presents that more detailed analysis regarding the trading pattern in various parts of the world. With this model, the geographical distance of the countries as well as their economic sizes are considered while making the analysis.

In the current scenario, the international trade is made by the guidelines which were established by the WTO or the World Trade Organization. However, the trade between the two countries is also influenced by the economic treaties among the countries. There are some agreements that include NAFTA among countries.

Despite the regulations that are involved in the process, international trade still provides various potential risks at the political and economic fronts. There are some that include the cancellation of international export or import licenses, the risks which are being involved to war and also the risk of imposing a ban on those imported products after the shipment of consignment and currency exchange controls.

Because of the international trade, you are permitted to expand the markets for both services as well as goods that otherwise may not have been available. This is the main reason why you would choose between Japanese, American or the German car. Due to the international trade, the market comes with a greater competition and such means that there are more competitive costs bringing a cheaper product to the consumer. The international trade offers such rise in the world economy wherein the costs of the supply and the demand would affect and also get affected by those global events.

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