What is international trade?

In simple words, any exchange between two countries is called international trade. Usually in a country, all the required goods are not available and the conditions for its production are not provided. In return Some countries have better conditions to produce certain goods and services, for this reason, countries tend to trade internationally.
In this article, you’ll learn about international trade, types of that, and the benefits and misfortunes of international trade. We suggest you read this to the end.

History of international trade

The history of international trade began with the exchange of goods for goods . This trade gave way to mercantilism in the 16th and 17th centuries and moved to liberalism in the 18th century. It was during this period that Adam Smith, the father of economics, wrote the famous book “The Wealth of Nations” in 1776, in which he defined the importance of specialization in production and also spoke about international trade.
All of these ideas and economic principles have influenced international trade policies in all countries. So, in the last few centuries, countries have entered various treaties to move towards free trade.

Types of international trade


International trade is divided into three categories:

  • Import 

Import means buying goods and services from a foreign country. Because it can not be produced in your own country due to high costs or other reasons.
for example, The UAE imports clothing from India because it is cheaper to import than to produce in its own country.

  • export 

Export means selling domestic products and services to foreign countries. This is exactly the opposite of importing.
For example, Oil barrels are exported annually from Iran to different countries.

  • Entrepot 
  • Lack of access and communication between the two countries
  • Lack of trade agreement between the two countries
  • There is no commercial tax on bank facilities in the importing country

Advantage of international trade

  • International trade enables a country to obtain high-quality goods and services at extremely affordable prices to meet the needs of the people.
  • To facilitate international trade, several countries have begun to enter into unique trade agreements. These agreements allow less developed countries to improve their production capabilities.
  • The international trade system also opens many doors in terms of job creation and employment.

Disadvantages of international trade


  • International trade is highly dependent on other countries for goods and services.
  • Shipping costs are high and sometimes there are communication problems.
  • There are import and export restrictions.