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What Are the Different Aspects of International Trade?

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  • Written By: Peter Hann
  • Edited By: Angela B.
  • Last Modified Date: 25 September 2016
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International trade is conducted by businesses that are efficient enough to be competitive on the international market. Businesses in different countries tend to specialize in different sectors; for example, industrialized countries may have companies that specialize in high-tech manufacturing or financial services, while developing countries may export mainly agricultural products. Governments impose tariffs or quotas to protect some domestic industries from foreign imports, and these are a barrier to international trade. International agreements and organizations have aimed to increase trade by reducing tariff barriers and providing dispute resolution procedures. World trade also has benefited from improved means of transport, containerization and harmonized terms for international contracts.

Trading internationally has been facilitated by international agreements and organizations such as the World Trade Organization (WTO). Negotiations have led to reductions in tariffs and quotas that had been a brake on international trade. When disputes arise over the imposition of tariffs, there is a procedure for dispute resolution that includes the imposition of penalties on countries found to have broken the rules. Although international agreements are often hard to reach, negotiations in the WTO ensure that international trade issues are thoroughly considered. Issues remaining for world trade as of 2011 include reducing subsidies to farmers in industrialized countries and consideration of the need for protection for agriculture and other sectors in poorer developing countries.

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The introduction of containerization has made the logistics of international freight much more straightforward. The development of large container seaports and inland dry ports, as well as rapid docking, loading and unloading have spurred international trade. Larger ships are guided to port by radar and carry larger loads. The ports have expanded in size to accommodate the freight and have developed infrastructure to move it on quickly.

International contract terms have been harmonized by the work of organizations such as the International Chamber of Commerce (ICC). Standard contracts reduce the possibility of misunderstanding between buyers and sellers with respect to the allocation of freight and insurance costs. The increased use of electronic means of payment has reduced concerns about payment, and letters of credit have been adapted accordingly to ensure that financial matters are expedited as quickly and smoothly as possible.

International trade disputes may be resolved more easily as a result of the introduction of mechanisms for dispute resolution through agencies such as the United Nations Commission on International Trade Law (UNCITRAL). Countries have facilitated international trade for businesses by signing bilateral investment protection agreements that make certain guarantees for investors and provide for dispute resolution. Similarly, bilateral double taxation agreements between countries aim to eliminate the possibility of double taxation on businesses trading internationally and provide a mechanism for resolution of tax disputes.

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Discuss this Article

ysmina
Post 3

@SarahGen-- Th EU is an economic union as well as a political one. So they have a common trade policy and free trade among EU members.

turquoise
Post 2

@SarahGen-- Countries in the same region, such as US and Canada, may have special trade agreements to encourage trade between them.

There can be various reasons for this. It could be to take advantage of the geographic proximity (goods are easier to ship because of a closer distance). It could be to strengthen the regional economy and become more competitive in the global market against other economies. It could also be a political decision, to strengthen the ties between these countries.

Politics and economics are more inter-related than people realize. Sometimes countries can place international trade barriers against other countries simply to make a political statement. This could be something like an economic embargo, or higher trade tariffs for that country. It's like a punishment that governments impose when they don't get what they want politically. An example could be the embargoes placed against Iran after the American Embassy hostage crisis.

SarahGen
Post 1

Why do governments in the same region often have low-tariff or no-tariff trade agreements? Don't they need to protect any industries?

And how does trade in regional unions work? For example, what is EU international trade like? Do EU countries do individual trading or do they trade as union?

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