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International trade is the exchange of capital, goods, and services across international borders or territories. It is the exchange of goods and services among nations of the world. In most countries, such trade represents a significant share of gross domestic product (GDP). While international trade has existed throughout history (for example Uttarapatha, Silk Road, Amber Road, scramble for Africa, Atlantic slave trade, salt roads), its economic, social, and political importance has been on the rise in recent centuries.
Trading globally gives consumers and countries the opportunity to be exposed to new markets and products. Almost every kind of product can be found on the international market: food, clothes, spare parts, oil, jewellery, wine, stocks, currencies and water. Services are also traded: tourism, banking, consulting and transportation. A product that is sold to the global market is an export, and a product that is bought from the global market is an import. Imports and exports are accounted for in a country's current account in the balance of payments.
Industrialization, advanced technology, including transportation, globalization, multinational corporations, and outsourcing are all having a major impact on the international trade system. Increasing international trade is crucial to the continuance of globalization. Without international trade, nations would be limited to the goods and services produced within their own borders. International trade is, in principle, not different from domestic trade as the motivation and the behavior of parties involved in a trade do not change fundamentally regardless of whether trade is across a border or not. The main difference is that international trade is typically more costly than domestic trade. The reason is that a border typically imposes additional costs such as tariffs, time costs due to border delays and costs associated with country differences such as language, the legal system or culture.
Another difference between domestic and international trade is that factors of production such as capital and labor are typically more mobile within a country than across countries. Thus international trade is mostly restricted to trade in goods and services, and only to a lesser extent to trade in capital, labor or other factors of production. Trade in goods and services can serve as a substitute for trade in factors of production. Instead of importing a factor of production, a country can import goods that make intensive use of that factor of production and thus embody it. An example is the import of labor-intensive goods by the United States from China. Instead of importing Chinese labor, the United States imports goods that were produced with Chinese labor. One report in 2010 suggested that international trade was increased when a country hosted a network of immigrants, but the trade effect was weakened when the immigrants became assimilated into their new country.
The history of international trade chronicles notable events that have affected the trade between various economies.
There are several models which seek to explain the factors behind international trade, the welfare consequences of trade and the pattern of trade.
The following table is a list of the 21 largest trading nations according to the World Trade Organization.
|Rank||Country||International Trade of
Goods (Billions of USD)
|International Trade of
Services (Billions of USD)
|Total International Trade
of Goods and Services
(Billions of USD)
|21||United Arab Emirates||491||92||583|
|Rank||Commodity||Value in US$('000)||Date of
|1||Mineral fuels, oils, distillation products, etc.||$2,183,079,941||2012|
|2||Electrical, electronic equipment||$1,833,534,414||2012|
|3||Machinery, nuclear reactors, boilers, etc.||$1,763,371,813||2012|
|4||Vehicles other than railway||$1,076,830,856||2012|
|5||Plastics and articles thereof||$470,226,676||2012|
|6||Optical, photo, technical, medical, etc. apparatus||$465,101,524||2012|
|8||Iron and steel||$379,113,147||2012|
|10||Pearls, precious stones, metals, coins, etc.||$348,155,369||2012|
President George W. Bush observed World Trade Week on May 18, 2001, and May 17, 2002. On May 13, 2016, President Barack Obama proclaimed May 15 through May 21, 2016, as World Trade Week, 2016. On May 19, 2017, President Donald Trump proclaimed May 21 through May 27, 2017, as World Trade Week, 2017.
Mundra, Kusum, Immigrant Networks and U.S. Bilateral Trade: The Role of Immigrant Income. IZA Discussion Paper No. 5237. Available at SSRN: http://ssrn.com/abstract=1693334 ... this paper finds that the immigrant network effect on trade flows is weakened by the increasing level of immigrant assimilation.
Data on the value of exports and imports and their quantities often broken down by detailed lists of products are available in statistical collections on international trade published by the statistical services of intergovernmental and supranational organisations and national statistical institutes. The definitions and methodological concepts applied for the various statistical collections on international trade often differ in terms of definition (e.g. special trade vs. general trade) and coverage (reporting thresholds, inclusion of trade in services, estimates for smuggled goods and cross-border provision of illegal services). Metadata providing information on definitions and methods are often published along with the data.