International trade is the exchange of capital
, and services
across international borders
or territories because there is a need or want of goods or services.
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 road
s), 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 states
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 governmental statistical agencies publish official statistics
on international trade.
Characteristics of global trade
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
Trading globally may give consumer
s and countries the opportunity to be exposed to new market
s and products. Almost every kind of product can be found in the international market
, for example: food, clothes, spare parts, oil, jewellery, wine, stocks, currencies, and water. Services are also traded, such as in tourism
, and transport
and multinational corporation
s have major impacts on the international trade system
Increasing international trade is crucial to the continuance of globalisation. Countries would be limited to the goods and services produced within their own borders
without international trade. International trade benefits many countries in various aspects.
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 tariff
s, 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.
The history of international trade
chronicles notable events that have affected trading among various economies.
Theories and models
There are several models that 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 states according to the World Trade Organization
Top traded commodities by value (exports)
Source: International Trade Centre
In the United States, the various U.S. Presidents
have held observances to promote big and small companies to be more involved with the export and import of goods and services. President George W. Bush
observed World Trade Week on May 18, 2001, and May 17, 2002. On May 13, 2016, President Barack Obama
proclaimed May 15 through May 21, 2016, World Trade Week, 2016. On May 19, 2017, President Donald Trump
proclaimed May 21 through May 27, 2017, World Trade Week, 2017. World Trade Week is the third week of May. Every year the President declares that week to be World Trade Week.
International trade versus local production
In the case of food production trade-offs in forms of local food
and distant food production are controversial with limited studies comparing environmental impact and scientists cautioning that regionally specific environmental impacts should be considered. Effects of local food on greenhouse gas emissions may vary per origin and target region of the production. A 2020 study indicated that local food crop production alone cannot meet the demand for most food crops with "current production and consumption patterns" and the locations of food production ''at the time of the study'' for 72–89% of the global population and 100–km radiuses as of early 2020.
Studies found that food mile
s are a relatively minor factor of carbon emissions, albeit increased food localization may also enable additional, more significant, environmental benefits such as recycling of energy, water, and nutrients. For specific foods regional differences in harvest seasons may make it more environmentally friendly to import from distant regions than more local production and storage or local production in greenhouses.
Qualitative differences and economic aspects
Qualitative differences between substitutive products of different production regions may exist due to different legal requirements and quality standards or different levels of controllability by local production- and governance
-systems which may have aspects of security
beyond resource security, environmental protection
, product quality
and product design
. The process of transforming supply as well as labor rights
may differ as well.
Local production has been reported to increase local employment in many cases. A 2018 study claimed that international trade can increase local employment. A 2016 study found that local employment and total labor income in both manufacturing and nonmanufacturing were negatively affected by rising exposure to imports.
Local production in high-income countries, rather than distant regions may require higher wages for workers. Higher wages incentivize automation
which could allow for automated workers' time to be reallocated by society and its economic mechanisms or be converted into leisure-like time.
Specialization, production efficiency and regional differences
Local production may require knowledge transfer
, technology transfer
and may not be able to compete in efficiency initially with specialized
, established industries and businesses, or in consumer demand without policy measures such as eco-tariff
s. Regional differences may cause specific regions to be more suitable for specific production, thereby increasing advantages of specific trade over specific local production. Forms of local production that are highly localized may not be able to meet the efficiency of more large-scale, highly consolidated production in terms of efficiency, including of environmental impact.
A systematic, and possibly first large-scale, cross-sectoral analysis of water
in 189 countries that links total and sectorial consumption to sources showed that countries and sectors are highly exposed to over-exploited, insecure, and degraded such resources with economic globalization
having decreased security of global supply chains
. The 2020 study finds that most countries exhibit greater exposure to resource risks
via international trade – mainly from remote production
sources – and that diversifying trading partners is unlikely to help countries and sectors to reduce these or to improve their resource self-sufficiency
* Aggressive legalism
* Export control
* Free trade
* Free-trade area
* Gravity model of trade
* Import (international trade)
* International business
* International trade law
* Market Segmentation Index
* Monopolistic competition in international trade
* Northwest Passage
* Panama Canal
* Suez Canal
* Trade Adjustment Assistance
* Trade bloc
* Trade finance
* United Nations Conference on Trade and Development
* List of countries by current account balance
* List of countries by imports
* List of countries by exports
* List of international trade topics
Statistics from intergovernmental sources
Data on the value of exports and imports and their quantities often broken down by detailed lists of products are available in statistical collections on international trade published by the statistical services of intergovernmental and supranational organisations and national statistical institutes. The definitions and methodological concepts applied for the various statistical collections on international trade often differ in terms of definition (e.g. special trade vs. general trade) and coverage (reporting thresholds, inclusion of trade in services, estimates for smuggled goods and cross-border provision of illegal services). Metadata providing information on definitions and methods are often published along with the data.
United Nations Commodity Trade DatabaseTrade Map, trade statistics for international business development
European Union International Trade in Goods DataFood and Agricultural Trade Data
Other data sources
Resources for data on trade
including the gravity model
Asia-Pacific Trade Agreements Database (APTIAD)Asia-Pacific Research and Training Network on Trade (ARTNeT)World Integrated Trade Solution (WITS)Market Access Map, an online database of customs tariffs and market requirementsTrade Data Monitor, a database of monthly import/export statistics for all countries and commodities (subscription required)ExportNation Trade StatisticsExport Port and Product List
Other external links
The Observatory of Economic ComplexityInternational Trade
* The McGill Faculty of Law runs a Regional Trade Agreements Database that contains the text of almost all preferential and regional trade agreements in the world.ptas.mcgill.caHistorical documents on international trade
available on FRASER