🚢 INTERNATIONAL TRADE

Trade

Barter system, where direct exchange of goods took place. Every January after the harvest season Jonbeel Mela takes place in Jagiroad, 35 km away from Guwahati and it is possibly the only fair In India, where the barter system is still alive. A big market is organised during this fair and people from various tribes and communities exchange their products. Paper & coin currency are rare objects with very high intrinsic value served as money, like, flintstones, obsidian, cowrie, shells, tiger’s paws, whale’s teeth, dogs teeth, skins, furs, cattle, rice, peppercorns, salt, small tools, copper, silver and gold. The word salary comes from the Latin word Salarium which means payment by salt.

History of International Trade

In ancient times, transporting goods over long distances was risky, hence trade was restricted to local markets. Only the rich people bought jewellery, costly dresses and this resulted in trade of luxury items.
The silk route is an early example of long distance trade connecting Rome to china. 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 newform 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-industrialized 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 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 Tariffs and Trade (which later became the World Trade Organisation), helped in reducing tariffs.

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.

1. Basis Of International Trade

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.
Geological structure : It determines the mineral resource base and topographical differences ensure diversity of crops and animals raised.
Mineral resources : They are unevenly distributed the world over. The availability of mineral resources provides the basis for industrial development.
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.
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. Carpets of Iran, North America’s - leather work, Indonesian batik cloth are prized handicrafts are famous.
Size of population: Densely populated countries have large volumes of internal trade but little external trade because most of the agricultural and industrial production is consumed in the local markets.
Stage of Economic Development: Industrialised nations export machinery, finished products and import food grains and raw materials. The situation is opposite in agriculturally important countries.
Extent of Foreign Investment: Developing countries lack capital so foreign investment can boost trade in developing countries by developing plantation agriculture.
Transport: Lack of transport in olden times, restricted trade only to local areas. The expansion of rail, ocean and air transport, better means of refrigeration and preservation, trade has experienced spatial expansion.

2. Aspects Of International Trade

International trade has three very important aspects. They are volume, sectoral composition and direction of trade.
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.
Composition of trade: Earlier primary goods were more in total traded goods, then there was dominance of manufactured goods and now there is dominance of the service sector which includes transportation and other commercial services.
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.
Direction of Trade: Earlier valuable goods and artefacts were exported to European countries by the developing countries. Later in the 19th century, manufactured goods from European countries were exchanged with foodstuffs and with raw materials from their colonies.

3. 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 a negative or unfavourable balance of trade. If the value of exports is more than the value of imports, then the country has a positive or favourable 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.
Multilateral trade : Multilateral 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.

Free Trade

The act of opening up economies for trading is known as free trade or trade liberalisation. 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.
Globalisation along with free trade can adversely affect the economies of developing countries by not giving an equal playing field by imposing conditions which are unfavourable.
Dumping implies export at a price that is lower in the foreign market than the price in the domestic market. WTO decides whether dumping is unfair competition.

1. WTO

In 1948, 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 and 164 countries are its members.
India has been one of the founding members of WTO.

2. Regional Trade Blocs

These are developed as a response to the failure of global organisations. There are 120 regional trade blocs that generate 52% of the world’s trade.

Some of the trade blocs are:

- ASEAN (Association of South East Asian Nations)

Headquarters - Jakarta, Indonesia.
Member Nations - Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
Origin - Aug, 1967
Commodities - Agro products, rubber, palm oil, rice, copra, Coffee, minerals – copper, coal, nickel and tungsten. Energy– petroleum and natural gas and Software Products.
Other areas of cooperation - Accelerate economic growth, cultural development, peace and regional stability

- CIS (Common wealth of independent states)

Headquarters - Minsk, Belarus.
Member Nations- Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan.
Commodities - Crude oil, natural gas, gold, cotton fibre, aluminium
Other areas of cooperation - Integration and cooperation on matters of economics, defence and foreign policy.

- EU(European Union)

Headquarters - Brussels, Belgium.
Member Nations - Austria, Belgium, Denmark, France, Finland, Ireland, Italy, the Netherlands, Luxemburg, Portugal, Spain and Sweden.
Origin - EEC-March 1957 EU-1992, Feb
Commodities - Agro products, minerals, chemicals, wood paper, transport vehicles, optical instruments, clocks- works of art, antiques.
Other areas of cooperation - Single market with single currency.

- LAIA(Latin American Integration Association)

Headquarters - Montevideo, Uruguay.
Member Nations - Argentina, Bolivia, Brazil, Columbia, Ecuador, Mexico, Paraguay, Peru, Uruguay and Venezuela
Origin - 1960

- NAFTA(North American Free Trade Association)

Member Nations - U.S.A., Canada and Mexico
Origin - 1994
Commodities - Agro products, motor vehicles, automotive parts, computers, textiles.

- OPEC(Organisation of Petroleum Exporting Countries)

Headquarters - Vienna, Austria.
Member Nations - Angola, Algeria, Congo, Equatorial Guinea, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, U.A.E. and Venezuela
Origin - 1949
Commodities - Crude petroleum
Other areas of cooperation - Coordinate and unify petroleum policies

- SAFTA(South Asian Free Trade Agreement)

Member Nations - Bangladesh, Maldives, Bhutan, Nepal, India, Pakistan and Sri Lanka.
Origin - Jan -2006
Other areas of cooperation - Reduce tariffs on inter-regional trade

3. Concerns Related to International Trade

The merits and demerits of international trade are;

Merits of International Trade : International trade is beneficial if it promotes regional specialisation, higher level of production, better standard of living, worldwide availability of goods and sendees, equalisation of price and wages and diffusion of knowledge and culture.
Demerits of International Trade : The demerits are, it leads to dependence on other countries, uneven levels of development, exploitation and commercial rivalry.

Gateways of International Trade

Ports

The chief gateways of the world of international trade are the harbors 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.

(i). Types Of Ports- Cargo Handled

Industrial Ports :The ports that handle bulk cargo like grain, ores, oil, chemicals are called industrial ports.
Commercial Ports: Ports handling packaged products, manufactured goods, passengers are commercial ports.
Comprehensive Ports: Ports that handle bulk and general cargo in large volumes are called comprehensive ports. Most of the world’s great ports are classified as comprehensive ports.

(ii). Types of Ports on the basis of Location

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 Hooghly, a branch of the river Ganga.
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.

(iii). Types Of Ports 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. E.G, Dover in England, Calais in France across the English channel.
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.

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Thursday, 23 December 2021

International Trade