World Trade involves the process of exchanging goods, services and capital across countries, regions and international borders. Across the world, trade has become a major lifeline for the continual existence and sustenance of most countries. It is not by accident that the crop of countries that have the highest standard of living per capita fall within the top trading countries in the world.
Factors Affecting World Trade:
Policies, Laws and Regulations
Infrastructure, Logistics and Facilities
Funding and Exchange Rate
Strength of Economy
Types of Trade:
Trade in Goods
Trade in Services
The Trade in Goods involves the exchange of physical manufactured items between either the manufacturer / seller and the buyer (See World’s Top Traded Commodities)
The Trade in Services is the exchange of intangible products or values between the provider and the customer.
Mode of International Trade:
An import; to the receiving country/territory; is any type of good or service that is received by that country/territory from another country/territory.
An export; to the country of origin; is any good or service that is forwarded from a country/territory to another country/territory. Both imports and exports are major components of the country’s current account under the balance of payment entry.
Balance of Trade
The concept of measuring the ratio of the monetary values of a country’s import to export is known as balance of trade. This evaluates the traffic of exports and imports for the concerned party over a period of time.
If the volume of export is more than import, the country is said to have a trade surplus.
If the same country imports more volume than export, it is said to have a trade deficit.
Most countries strive to have trade surplus because it earns them foreign exchange for needed development (See Definition of Industry Terms)
The concept of expediting action on the improvement of procedures and regulations governing the movement of goods and services across national borders is known as trade facilitation. In the implementation, critical scrutiny is given to most factors that guide the successful execution of trade in an environment.
Free Trade Agreement
The preparation and implementation of trade policies that does not restrict both imports and exports is known as free trade agreement.
Trade blocs are intergovernmental agreements that is implemented to reduce or eliminate tariffs and other impediments to free trade, in order encourage free flow of trade. This is usually implemented among regional intergovernmental stakeholders.
The successful expansion of world trade in modern times has been greatly influenced by the introduction of advanced technologies in the areas of manufacturing, transportation and accessibility. The specific elements include areas of industrialization and globalization. Industrialization involves the process of mass production while globalization involves the process of worldwide accessibility of goods and services irrespective of where they are made. At the heart of globalization are mass production, outsourcing, containerization and trade facilitation.
Comparatively, the processes involved in international trade are more complicated than domestic trade. International trade involves meeting international standards, following certain protocols, abiding by extant international laws, and following the customs and excise regulations of a foreign country.
The World Trade Organization is the leading organization in charge of trade regulation in the world. It was created to ensure that the the process of trade engagement between two or more countries are carried out in fair terms.