International trade occurs when countries exchange goods and services. It benefits countries by allowing them to specialize in producing goods where they have lower costs or a comparative advantage. This makes resources more efficiently used globally. International trade takes place as countries have differences in climate, resources, labor, and capital that provide opportunities for specialization. When a country can produce a good at a lower price than another, both countries benefit through trade. The main benefits of international trade are comparative advantage, economies of scale, increased competition, transfer of technology, and more jobs.

1. INTERNATIONAL TRADE
Basis, Meaning, Definition, Advantage
By- Jyoti Rastogi
Assistant Professor
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Jyoti Rastogi (Assistant Professor)

2. Why Trade?
Let's use an example to explain.
Say Nikhil lives on an island with a coconut tree. Rishi lives
on another island with a banana tree. Nikhil tired of eating
coconuts and desires something new to eat. Surprisingly
enough, Rishi is tired of bananas and would love some nice
sweet coconut. In this example, trade would benefit both parties.
This example presents only one of the two cases in which
trade is adventurous or advantageous .
In the other case, a country can produce goods at an
absolutely or relatively lower price than another country.
These conditions are called the absolute advantage and the
comparative advantage respectively.
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Jyoti Rastogi (Assistant Professor)

3. Basic of International Trade
A country specializes in a specific commodity due to mobility,
productivity, and other endowments of economic resources. This
stimulates a country to go for international trade.
There are differences in climatic conditions and geological deposits as
also in the supply of labour and capital. These differences provide a
country an opportunity to specialize in the production of some specific
commodities. Such specialization is facilitated by the exchange of
surplus production through international trade.
International trade takes place when buyers find foreign markets cheaper
to buy in and sellers find them more profitable to dispose of their
products than the domestic market. Thus, more effective use of the
world’s resources is made possible through international trade.
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Jyoti Rastogi (Assistant Professor)

4. Meaning
International trade, economic transactions that are made between
countries. Among the items commonly traded are consumer goods,
such as television sets and clothing; capital goods, such as
machinery; and raw materials and food. Other transactions involve
services, such as travel services and payments for foreign patents.
International trade transactions are facilitated by international financial
payments, in which the private banking system and the central
banks of the trading nations play important roles.
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Jyoti Rastogi (Assistant Professor)

5. Definition
International Trade refers to the exchange of products and services from
one country to another. In other words, imports and exports.
International trade consists of goods and services moving in two
directions:
1. Imports – flowing into a country from abroad.
2. Exports – flowing out of a country and sold overseas.
Visible trade refers to the buying and selling of goods – solid, tangible
things – between countries. Invisible trade, on the other hand, refers to
services.
Most economists globally agree that international trade helps boost
nations’ wealth.
When a person or company purchases a cheaper product or service from
another country, living standards in both nations rise.
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Jyoti Rastogi (Assistant Professor)

6. Why does international trade exist?
We import goods and services for several reasons.
– Price: a foreign company can produce something more cheaply.
– Quality: may be superior abroad. For example, Scotch whisky from
Scotland, in most people’s opinion, is superior to any local alternative.
That is why Scotland exports about 37 bottles of Scotch every second.
– Availability: it might not be possible to produce the item locally.
Therefore, the only way consumers can buy it is by importing it.
A raw material, such as oil, iron, bauxite, gold, etc. might not exist at home.
Japan, for example, has no domestic reserves of oil. However, it is the
fourth largest consumer of oil in the world. Japan imports virtually all its oil.
– Demand: might be greater than local supply. To satisfy the difference, it
is necessary to import.
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Jyoti Rastogi (Assistant Professor)

7. Advantages of international trade
– Comparative Advantage: trade encourages a nation to specialize in producing or
supplying only those goods and services which it can deliver more effectively and at the
best price.
– Economies of Scale: Producing in higher volumes provides greater economies of
scale. In other words, the cost of producing each item is lower.
– Competition: international trade boosts competition. This, in turn, is good for prices
and quality. If suppliers have to compete more, they will work harder to sell at the
lowest price and best quality possible. Consumers benefit by having more choice, more
money left over, and top-quality goods.
– Transfer of Technology: increases thanks to international trade. Transfer of
technology goes from the originator to a secondary user. In fact, that secondary user is
often a developing nation.
– Jobs: great trading nations such as Japan, Germany, the UK, the USA, and South
Korea have one thing in common. They have much lower levels of unemployment
than protectionist countries.
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Jyoti Rastogi (Assistant Professor)

8. THANKS
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Jyoti Rastogi (Assistant Professor)