- barter system, where direct exchange of goods took place.
- Every January after the harvest season Jon Beel Mela takes place in Jagiroad, 35 km away from Guwahati and it is possibly the only fair In India, where barter system is still alive. A big market is organised during this fair and people from various tribes and communi- ties exchange their products
HISTORY OF INTERNATIONAL TRADE
- The Silk Route is an early example of long distance trade connecting Rome to China – along the 6,000 km route.
- The traders transported Chinese silk, Roman wool and precious metals and many other high value commodities from intermediate points in India, Persia and Central Asia.
- Fifteenth century onwards, the European colonialism began and along with trade of exotic commodities, a new form of trade emerged which was called slave trade.
- The Portuguese, Dutch, Spaniards, and British captured African natives and forcefully transported them to the newly discovered Americas for their labour in the plantations.
- After the Industrial Revolution the demand for raw materials like grains, meat, wool also expanded, but their monetary value declined in relation to the manufactured goods.
- The industrialized nations imported primary products as raw materials and exported the value added finished products back to the non-industrialised nations.
- In the later half of the nineteenth century, regions producing primary goods were no more important, and industrial nations became each other‘s principle customers.
- During the World Wars I and II, countries imposed trade taxes and quantitative restrictions for the first time. During the post- war period, organisations like General Agreement for T ariffs and Trade (which later became the World Trade Organisation), helped in reducing tariff.
Why Does International Trade Exist?
- International trade is the result of specialization in production.
- international trade is based on the principle of comparative advantage, complementarity and transferability of goods and services and in principle, should be mutually beneficial to the trading partners.
Basis of International Trade
1. Difference in national resources: The world‘s national resources are unevenly distributed because of differences in their physical make up i.e. geology, relief soil and climate.
(a) Geological structure: It determines the mineral resource base and topographical differences ensure diversity of crops and animals raised.
(b) Mineral resources: They are unevenly distributed the world over. The availability of mineral resources provides the basis for industrial development.
(c) Climate: It influences the type of flora and fauna that can survive in a given region. It also ensures diversity in the range of various products, e.g. wool production can take place in cold regions, bananas, rubber and cocoa can grow in tropical regions.
2. Population factors:
The size, distribution and diversity of people between countries affect the type and volume of goods traded.
Cultural factors: Distinctive forms of art and craft develop in certain cultures which are valued the world over, e.g. China produces the finest porcelains and brocades.
Size of population: Densely populated countries have large volume of internal trade but little external trade because most of the agricultural and industrial production is consumed in the local markets.
3. Stage of economic development
4. Extent of foreign investment
Important Aspects of International Trade
International trade has three very important aspects.
1. Volume of Trade
- The actual tonnage of goods traded makes up the volume. However, services traded cannot be measured in tonnage. Therefore, the total value of goods and services traded is considered to be the volume of trade.
2. Composition of Trade
- agricultural products, fuels and mining products, fuels, manufactures, iron and steel, chemicals, office and telecom equipment, automotive products, textiles and clothing are major merchandise which are traded over the world.
3. Direction of Trade
Balance of Trade
- Balance of trade records the volume of goods and services imported as well as exported by a country to other countries.
- If the value of imports is more than the value of a country‘s exports, the country has negative or unfavorable balance of trade.
- If the value of exports is more than the value of imports, then the country has a positive or favorable balance of trade.
Types of International Trade
- Bilateral trade: Bilateral trade is done by two countries with each other. They enter into agreement to trade specified commodities amongst them.
- Multi-lateral trade: As the term suggests multi-lateral trade is conducted with many trading countries. The same country can trade with a number of other countries.
- The country may also grant the status of the ―Most Favoured Nation (MFN) on some of the trading partners
Case for Free Trade
- The act of opening up economies for trading is known as free trade or trade liberalization.
- This is done by bringing down trade barriers like tariffs. Trade liberalisation allows goods and services from everywhere to compete with domestic products and services.
- free trade should not only let rich countries enter the markets, but allow the developed countries to keep their own markets protected from foreign products.
- Countries also need to be cautious about dumped goods; as along with free trade dumped goods of cheaper prices can harm the domestic producers
- Dumping The practice of selling a commodity in two countries at a price that differs for reasons not related to costs is called dumping.
World Trade Organisation
- In1948, to liberalise the world from high customs tariffs and various other types of restrictions, General Agreement for Tariffs and Trade (GATT) was formed by some countries.
- GATT was transformed into the World Trade Organisation from 1st January 1995.
- WTO is the only international organization dealing with the global rules of trade between nations. It sets the rules for the global trading system and resolves disputes between its member nations.
- WTO also covers trade in services, such as telecommunication and banking, and others issues such as intellectual rights.
- many developed countries have not fully opened their markets to products from developing countries. It is also argued that issues of health, worker‘s rights, child labour and environment are ignored
- WTO Headquarters are located in Geneva, Switzerland.
- 149 countries were members of WTO as on December 2005
- India has been one of the founder member of WTO
Regional Trade Blocs
- Regional Trade Blocs have come up in order to encourage trade between countries with geographical proximity, similarity and complementarities in trading items and to curb restrictions on trade of the developing world.
- Today, 120 regional trade blocs generate 52 per cent of the world trade
Concerns Related to International Trade
- International trade can prove to be detrimental to nations of it leads to dependence on other countries, uneven levels of development, exploitation, and commercial rivalry leading to wars.
- Global trade affects many aspects of life; it can impact everything from the environment to health and well-being of the people around the world.
- As countries compete to trade more, production and the use of natural resources spiral up, resources get used up faster than they can be replenished. As a result, marine life is also depleting fast, forests are being cut down and river basins sold off to private drinking water companies.
- Multi- national corporations trading in oil, gas mining, pharmaceuticals and agri-business keep expanding their operations at all costs creating more pollution – their mode of work does not follow the norms of sustainable development.
- If organisations are geared only towards profit making, and environmental and health concerns are not addressed, then it could lead to serious implications in the future.
GATEWAYS OF INTERNATIONAL TRADE
- The chief gateways of the world of international trade are the harbours and ports.
- The ports provide facilities of docking, loading, unloading and the storage facilities for cargo.
- In order to provide these facilities, the port authorities make arrangements for maintaining navigable channels, arranging tugs and barges, and providing labour and managerial services.
- The importance of a port is judged by the size of cargo and the number of ships handled. The quantity of cargo handled by a port is an indicator of the level of development of its hinterland.
Types of Port
A. Types of port according to cargo handled
1. Industrial Ports: These ports specialize in bulk cargo-like grain, sugar, ore, oil, chemicals and similar materials.
2. Commercial Ports: These ports handle general cargo-packaged products and manufactured good. These ports also handle passenger traffic
3. Comprehensive Ports: Such ports handle bulk and general cargo in large volumes Most of the world‘s great ports are classified as comprehensive ports.
B. Types of port on the basis of location
1. Inland Ports: These ports are located away from the sea coast. They are linked to the sea through a river or a canal. Such ports are accessible to flat bottom ships or barges. For example, Manchester is linked with a canal and Kolkata is located on the river Hoogli, a branch of the river Ganga.
2. Out Ports: These are deep water ports built away from the actual ports. These serve the parent ports by receiving those ships which are unable to approach them due to their large size. Classic combination, for example, is Athens and its out port Piraeus in Greece.
C. port on the basis of specialised functions:
- Oil Ports: These ports deal in the processing and shipping of oil. Some of these are tanker ports and some are refinery ports.
- Ports of Call: These are the ports which originally developed as calling points on main sea routes where ships used to anchor for refuelling, watering and taking food items. Later on, they developed into commercial ports. Aden, Honolulu and Singapore are good examples.
- Packet Station: These are also known as ferry ports. These packet stations are exclusively concerned with the transportation of passengers and mail across water bodies covering short distances,
- Entrepot Ports: These are collection centres where the goods are brought from different countries for export. Singapore is an entrepot for Asia. Rotterdam for Europe, and Copenhagen for the Baltic region.
- Naval Ports: These are ports which have only strategic importance. These ports serve warships and have repair workshops for them. Kochi and Karwar are examples of such ports in India.