Trade Industry

The trade industry encompasses the exchange of goods and services across national borders. The history of foreign trade dates back more than 5,000 years. By the 1st century BC, the silk route had been established. This was an extensive network of trade routes, connecting destinations across Asia, North Africa and Europe. The international trade industry thrived in the twentieth century with advancements in transport and communication. Several countries lowered their restrictions and entered into international trade agreements. This resulted in the emergence of new economic powers and improved trade cooperation among nations.

Trade Industry: Imports

Goods and services that are bought from outside the national borders are called imports. The import industry offers the residents of a country a larger variety of goods. It also increases the number and quality of options available in the domestic market. However, it can be a threat to the local manufacturing industry. As protection against this, governments create trade barriers in terms of restrictions and duty.

Trade Industry: Exports

When a nation trades locally manufactured goods and services in the overseas market, it is known as exports. The export industry contributes towards a nation’s foreign reserves and often represents a significant part of the country’s GDP. To boost exports, most nations constitute a favorable export industry policy. Governments offer subsidies and other grants to promote the export industry.

One of the major issues posed by the export industry is dumping. When export companies price their products lower than the cost price, it is called dumping. This is done either to promote the export of goods or to subvert the domestic industry of the importing nation.

Factors Governing the Foreign Trade Industry

The most eminent factors governing the international trade industry are:

Trade blocs: These are created by multinational agreements to promote trade between two regions through mutual cooperation. Often, trade blocs are characterized by free trade agreements (FTAs) which tend to eliminate tariff and non-tariff barriers. Some of the largest trade blocs are NAFTA (North American Free Trade Agreement), EUCU (European Union Customs Union) and DR-CAFTA (Dominican Republic – Central America Free Trade Agreement).

International trade organizations: The World Trade Organization (WTO) is the most notable private organization that regulates trade among member nations. With 153 member nations, it represents over 95% of international trade. The International Monetary Fund (IMF) is another such organization influencing the trade industry through its policies.

With the opening up of new trade avenues worldwide, foreign trade is expected to greatly influence international economics and politics.