Chapter 9

INTERNATIONAL TRADE

FACTS THAT MATTER

•Transport, communication and trade establish links between producing and trade means voluntary exchange of goods and services. It is conducted at two levels National and International. International trade is among across national boundaries.

•Initial form of trade was the barter system where direct exchange of goods took place.

History of International Trade

•Initially trade was restricted to local markets. Silk route connecting Rome to China (6000 km) is an example of early trade where they traded in Chinese silk, Roman wool and high value commodities from India, Persian and central Asia.

•15th century onwards European colonialism started along with exotic commodities slave trade began. Dutch, British captured African natives and transported them to the Americas for plantation labour. Slave trade was abolished in Denmark in 1792,

•Great Britain in 1807 and US in 1808.

After Industrial Revolution the demand for raw materials like grains, wool went up as the industrial nations imported them and exported the value added finished products back to the non industralised nations.

•During World War I and II trade taxes and quantitative restrictions were imposed. Later GATT (which later became WTO) helped to reduce tariff.

Why does International Trade Exist?

International trade is based

1.Comparative advantage

2. Complimentarity and

3. Transferability of goods and services and in principle, should be mutually beneficial to the trading partners.

Basis of International trade

(I) Differences in National Resources of countries due to their varied geology, relief, soil, climate.

(a) Geological structure: determines mineral resource base and topographical difference ensure different types of crops and animal raised.

(b) Mineral Resources: unevenly distributed and provides the base for industrial development.

(c) Climate: Influences the type of flora and fauna of a region thus infiuence primary products.

(ii) Population factor: Size, distribution and diversity affect type and volume of trade.

(a) Cultural factors Specialised arts and crafts of distinctive regions are valued world over.

(b Size of population: Country with large population has huge domestic market and so low scope of export of their products.

(iii) Stages of economic development: At every stage of development, the types of items traded change. In the developing countries, agro products are exchanged for manufactured goods and vice versa for developed nations.

(iv) Extent of Foreign Investment: By investing in the development of capital in intensive industries in developing countries, the industrial nations ensure import of food stut, minerals and create markets for then finished products.

(v) Transport: With expansion of rail, ocean and air transport, better means ot refrigeration and preservation, trade has experienced spatial expansion.

Aspect of International Trade

International trade has three very important aspects-

(1) volume (2) Sectoral composition and (3) Direction of trade.

1. Volume of trade: Total value of goods and services traded is considered as the volume of trade.

2. Composition of trade: During the last century the nature of goods and services traded have undergone changes. Initially primary products were the main items - which was followed by manufactured products and currently long with the manufacturing sector, service sector is showing an upward trend.

3. Direction of trade: Historically, developing countries used to export valuable goods which got versed in the 19th century.

•The trading pattern changed drastically in the 2nd half of 20th century. Europe lost its colonies, while India, China started competing with developed countries.

Balance of Trade

•Records the volume of goods and services imported as well as exported by a country to other countries.

•Favourable/positive balance of trade: When the value of exports is more than that of imports for a country then that country has a +ve balance of trade.

•Unfavourable/Negative balance of trade means a country spends more on buying goods (imports) that it earns by selling (export) to of other countries leading to exhaustion of its financial reserves.

Types of International Trade

(a) Bilateral trade: done by two countries with each other.

(b) Multi-lateral trade: conducted with many trading countries.

Case for Free Trade

The act of opening up economies for trading is known as free trade or Trade Liberalisation. It is done by bringing down trade barriers and allowing goods from other countries to compete with domestic products.

World Trade Organisation (WTO)

In 1948, to liberalise world from high tariff and restrictions, General Agreement for Tariffs and Trade (GATT) was formed. In 1994 it was decided to set up a permanent institution for fair trading management and so GATT was transformed to WTO from 1st January, 1995.

Functions:

1. Deals with global rules of trade between nations.

2. Sets rules for global trading systems.

3. Dissolves disputes

4. Also covers services like Telecom, banking and Intellectual property rights.

Criticism:

1. Free trade is widening the gulf between rich and poor nations.

- The influential nations in WTO focus on their interest.

-Many developed countries have not opened their markets to products from developing nations.

- Issues of health, worker's rights, child labour and environment are ignored

Regional Trade Blocs

They have come up in order to encourage trade between countries with geographical proximity, similarity and complementarities in trading items and to curb restrictions o trade on developing world. port 120 regional trading blocs generate 52% of worlds trade. India is a member of SAFTA (South Asian Free Trade Agreement)

Concerns Related to International Trade

- International trade is beneficial if it leads to regional specialisation, higher level of production, availability of goods- diffusion of culture, knowledge etc.

-But international trade sometimes leads to

•Dependence on other countries.

•Uneven levels of development

•Exploitation and

•Commercial rivalry leading to war

•Depletion of resource environmental degradation.

Gateways of International Trade

•Chief gateways are ports and harbours. Passengers and cargo pass through these ports.

•Ports provide docking, loading, unloading and storage facilities for cargo. They maintain navigable channels, arrange tugs and barges and provide labour and managerial services.

•Importance of a port is judged by the size of cargo and number of ships handled.

We hope CBSE/MP Board Class 12th "Geography" Chapter 9 "International Trade" will help you.

Written By - HIMANSHU SHARMA