International trade is the exchange of capital, goods, and services across international borders or territories.^[1]

In most countries, such trade represents a significant share of gross domestic product (GDP). While international trade has existed throughout history (for example Uttarapatha, Silk Road, Amber Road, scramble for Africa, Atlantic slave trade, salt roads), its economic, social, and political importance has been on the rise in recent centuries.

Carrying out trade at an international level is a complex process when compared to domestic trade. When trade takes place between two or more nations factors like currency, government policies, economy, judicial system, laws, and markets influence trade.

To smoothen and justify the process of trade between countries of different economic standing, some international economic organisations were formed, such as the World Trade Organization. These organisations work towards the facilitation and growth of international trade. Statistical services of intergovernmental and supranational organisations and national statistical agencies publish official statistics on international trade.

Characteristics of global trade

A product that is transferred or sold from a party in one country to a party in another country is an export from the originating country, and an import to the country receiving that product. Imports and exports are accounted for in a country's current account in the balance of payments.^[2]

Trading globally gives consumers and countries the opportunity to be exposed to new markets and products. Almost every kind of product can be found in the international market: food, clothes, spare parts, oil, jewellery, wine, stocks, currencies, and water. Services are also traded: tourism, banking, consulting, and transportation

Advanced technology (including transportation), globalisation, industrialisation, outsourcing and multinational corporations have major impact on the international trade system.

Increasing international trade is crucial to the continuance of globalisation. Nations would be limited to the goods and services produced within their own borders without international trade.

Differences from domestic trade

International trade is, in principle, not different from domestic trade as the motivation and the behavior of parties involved in a trade do not change fundamentally regardless of whether trade is across a border or not.

However, in practical terms, carrying out trade at an international level is typically a more complex process than domestic trade. The main difference is that international trade is typically more costly than domestic trade. This is due to the fact that a border typically imposes additional costs such as tariffs, time costs due to border delays, and costs associated with country differences such as language, the legal system, or culture (non-tariff barriers).

Another difference between domestic and international trade is that factors of production such as capital and labor are often more mobile within a country than across countries. Thus, international trade is mostly restricted to trade in goods and services, and only to a lesser extent to trade in capital, labour, or other factors of production. Trade in goods and services can serve as a substitute for trade in factors of production. Instead of importing a factor of production, a country can import goods that make intensive use of that factor of production and thus embody it. An example of this is the import of labor-intensive goods by the United States from China. Instead of importing Chinese labor, the United States imports goods that were produced with Chinese labor. One report in 2010 suggested that international trade was increased when a country hosted a network of immigrants, but the trade effect was weakened when the immigrants became assimilated into their new country.^[3]

History

The history of international trade chronicles notable events that have affected trading among various economies.

Theories and models

There are several models which seek to explain the factors behind international trade, the welfare consequences of trade and the pattern of trade.

Most traded export products

Largest countries by total international trade

The following table is a list of the 21 largest trading nations according to the World Trade Organization.^{[4][failed verification]}

Top traded commodities by value (exports)

Source: International Trade Centre^[5]

Observances

President George W. Bush observed World Trade Week on May 18, 2001, and May 17, 2002.^[6][7] On May 13, 2016, President Barack Obama proclaimed May 15 through May 21, 2016, World Trade Week, 2016.^[8] On May 19, 2017, President Donald Trump proclaimed May 21 through May 27, 2017, World Trade Week, 2017.^[9][10] World Trade Week is the third week of May. Every year the President declares that week to be World Trade Week.^[11][12]

See also