International Trade Explanations

From Latin commercium, the trade is an activity that involves the purchase or sale of goods for processing, resale or use. It is a transaction that involves exchanging one thing for another, generally money. International, on the other hand, is that belonging to or relating to two or more countries or that has transcended the borders of a nation.

These two definitions allow us to refer to the notion of international trade, which is the commercial activity between two countries. In this sense, an exporting country sends products and / or services to an importing country.

In this sense, when it comes to international exports, it must be emphasized that many expert economists agree that they are the fundamental basis for any company to not only be able to consolidate itself in the market, but also to grow strongly.

Specifically, currently exports of this type are considered essential, taking into account not only the globalized world in which we live but also the crisis situation that certain countries are experiencing. And it is that in the latter case one of the only solutions that their companies have to emerge afloat is international trade.

International trade is often used as a synonym for world trade or foreign trade. This commercial modality implies the existence of open economies (that is, willing to allow the entry of goods from other countries).

In this matter, it should be noted that there are a series of concepts and terms that are fundamental. Thus, on the one hand, there would be protectionism, which is the policy that is developed in a country with the clear objective of protecting national products against the arrival of other foreigners. The way to achieve that is none other than imposing on them that they must face the payment of a series of tariffs.

Specifically, those who are committed to following this policy also emphasize that it is a way to balance what would be the balance of payments and to take care of national security, as regards production.

Another important term in international trade is free trade. This is a position totally contrary to protectionism since it considers that the exchange and flow of goods between nations should be allowed without any kind of restrictions.

According to abbreviationfinder, the international trade process was strengthened from the second half of the 20th century, with the advance of telecommunications and means of transport. The capitalist system, already established throughout the world after the fall of the Union of Soviet Socialist Republics (USSR), bases its growth on free trade and the elimination of borders and obstacles.

There are various economic theories that explain the importance and necessity of international trade. Adam Smith (1723-1790) claimed that goods should be produced in the countries with the lowest production costs and from there exported to the rest of the world, which is known as absolute advantage. David Ricardo (1772-1823), for his part, appealed to comparative advantage, which emphasized the relative costs that arose from the comparison between countries.

International Trade