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Types of International Trade
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Types of International Trade

The nature of international trade has evolved with the advent of the Internet and e-commerce. However, trade between countries or trade blocs is usually in the form of import trade, export trade, and entrepot trade.

Import Trade

Import trade is when a country purchases goods or services from another country to meet demand at home. In today’s interconnected world, every country depends on another for certain goods and services.

Export Trade

On the other hand, export trade is the opposite of import trade. In this case, a country sells locally made products to other countries for profit. The country exporting may benefit from raw materials such as wood or natural gas, or it may engage in manufacturing before sending to the country of demand.

As the knowledge economy grows in importance, other countries have begun specializing in training and exporting technical expertise to other countries. The Internet has made this even more dynamic, as you no longer need to leave your house to export knowledge and information.

Entrepot Trade

Sometimes, all a country has to do is take advantage of its geographical location to play an active role in international trade.  It can serve as a secure location for an exporting country to store and transport its goods to other countries.

This is known as entrepot trade. Aside from a strategic geographic location, the country at the center of entrepot trade must be politically stable, have good relations with other countries, and have good transport, logistical, and labor capabilities to facilitate the storage and safe transportation of goods and personnel.

EXIMA

Modern trade is interlinked in complex ways. Sometimes, the raw material exporting country ends up importing products, which are made with the same raw materials it exported. Others have specialized in importing and improving the value of the raw material to the point where they profit by applying their technical ability. This form of trade now makes up about 70% of world trade.

Advantages and the Need for Fairness

International trade allows countries to specialize in producing what they are good at. They are more efficient because they have the natural resources and talent. In theory, the system should benefit all parties.

However, it can be detrimental to local producers who face competition from abroad. Specialization can also lead to overdependence on some countries for certain goods and services. Subsidies are another contentious issue. Organizations like the World Trade Organization (WTO) must continue to engage countries to provide a fairer system that works for everyone.

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