Concept and Importance of International Trade

Concept of International Trade:

Trade means the exchange of goods and services between different persons. If the exchange of goods and services is made between the people of a country, it is called internal trade. On the other hand, if the exchange of goods and services is made between the people of different countries, it is called international trade. International trade is also known as foreign trade or external trade. It involves the export and import of goods and services.

According to D.C. Luckett, "The purchase of goods and services by the citizens of one country from the citizens of another country is called international trade."

In the words of R.G. Lipsey and K.A. Chrystal, "International trade refers to the exchange of goods and services that take place across international boundaries."

Thus, international trade is the exchange of goods and services between the people of different countries.

Importance of international trade:

1. Qualitative and cheaper goods: International trade helps in the better and efficient utilization of resources. Because of international trade, it is possible for every country to concentrate on the production of those goods which can be produced at lower cost and import other goods from other countries. Thus, international trade makes qualitative and cheaper goods available.

2. Agricultural development: Development of agriculture sector is not possible without its modernization. There is a need for machinery and tools, fertilizer, pesticides,  etc. for the modernization of the agriculture sector which can be imported from abroad and can be adapted to develop and modernize the agriculture sector.

3. Industrial development: Underdeveloped countries require machinery and capital goods to establish and operate industries. They have to import such machinery and capital goods from abroad. If there was no international trade, industrial development of these countries would be very difficult.

4. Development of competitive capacity: In order to stand in international trade, every country has to improve its competitive capacity. Necessity is the mother of invention. When the need arises, the efforts are made. Every country seeks to be able to survive in the international competition for the market. This leads to the development of competitive capacity.

5. Modern and high standard life: All the people of the world have modern and high standard life due to international trade. In the absence of international trade, the world would have to remain primitive. The people of many backward countries like Nepal are using high standard goods like cars, computers, air conditioners, television washing machines, etc. imported from other countries.

6. Increase in employment opportunities: International trade increases the number of export-oriented industries in the country. It encourages large scale production which helps to increase employment.

7. Expansion of the market: International trade helps to expand the market of small countries like Nepal. It integrates the country with other countries of the world. Goods produced efficiently can be sold worldwide in the extensive international market.

8. Benefit of technological progress: developing countries like Nepal are technologically backward. They are still using primitive technology. But in developed countries, there is rapid technological progress. International trade helps to import technology, receive technical knowledge and managerial skill.