Trade is the fundamental state of commercial activity, which encompasses the sale and acquisition of products and services. It entails the sale or exchange of commodities or services. The goods are built by the producers, then sold to a wholesaler, then to a retailer, and finally to the consumer. Within the economy, the trade can take place between the producers and the consumers. International commerce enables the governments to open up the new markets for goods and services that would otherwise be unavailable. It is for this reason that a consumer in the United States can choose between a Japanese, German, or American automobile. As a result of foreign trade, the market has more competition and thus more competitive prices, resulting in a lower price for the customer at home.
Trade can be divided into two subgroup:
Internal Trade
This type of trade is done within the geographical boundaries of a country.
The characteristics of internal commerce are as follows:
- Buying and selling items happens within the same country’s borders.
- Payment for products and services is done in the home country’s currency.
- It entails interactions between producers, customers, and middlemen.
- It is made up of a network of middlemen and agencies that facilitate the exchange of goods and services.
- When compared to international trade, the risk of transportation is much lower in domestic trade.
- In domestic trade, only the laws of the country in question must be obeyed.
- The goal of domestic trade is to deliver goods and services at a low cost.
- The goods must be manufactured in the United States.
- Goods must be purchased from a person or a company based in a specific country.
- Deliveries can be made utilizing locally available modes of transportation.
- It does not include any customs or import duties, but customers must pay the government taxes.
Internal Trade is further divided into two sub categories on the basis of quantity of goods,
- Wholesale Trade: A wholesaler is a middleman who connects producers and retailers. The wholesaler purchases huge quantities of products from manufacturers and sells them to retailers, who then sell them to customers. Wholesalers serve as a link between manufacturers and retailers.
- Retail: A retail trader connects wholesalers and customers. The retailer purchases things in smaller quantities from wholesalers and sells them to customers based on their needs. The Retailer is the individual who distributes things to customers. Hawkers, pedlars, and general stores are examples of small-scale retailers.
External Trade
This type of is done whenever trade occurs between two counties, it is also known as Foreign trade.
There are three Major subgroup of External Trade:
- Import Trade: Import commerce is defined as when a country’s home country obtains or purchases items from another one. In import, a trader from one country purchases goods from a trader from another country. A trader from India, for example, buys items from a dealer in China.
- Export Trade: When a country sells its products to another country, this is referred to as export commerce. A trader from India, for example, sells his wares to a trader in Dubai.
- Entrepot Trade: When a country imports things from another country and then re-exports them after adding some value, this is known as entrepot trade. For instance, an Indian trader (from India) might purchase raw materials from a Chinese trader (from China), transform them into completed items, and then re-export them to a Japanese trader (in JAPAN).
Conclusion
The exchange of goods and services, most typically in exchange for money, is referred to as trade. Within a country or between trading nations, trade can take place. The theory of comparative advantage predicts that international commerce benefits all parties, despite detractors’ claims that it actually leads to stratification among countries. Economists advocate for free commerce between nations, but political considerations can lead to protectionism, such as tariffs, as seen in “trade wars.”
Let us discuss about some benefits of trade:
- The Economy’s Growth: Trade helps to boost the economy because it provides new opportunities for people in each country where it is established. This also puts money into the open. As a result, commerce is the most vital pillar for any economy’s growth.
- Ensure a global presence: When a country first began to trade on both the domestic and international markets. The product’s global reach grew organically as people from other nations began to purchase it. As a result, trade gives the economy a global footprint.
- Assists Civilizations: When commerce is established in a country, it aids in the personal development of its citizens because trade is conducted in a systematic manner.
- As a result, when trade begins, it not only provides for the people, but it also teaches them about administration.
