Source

The mutual exchange of goods and services between different countries is called international trade.

(Made in canva)

In very early times man's desires were limited to the needs of food and drink in which he was largely self-sufficient. Therefore, he had to do a little economic struggle. Then as his needs increased, his neediness also increased and the series of economic struggle also got longer. Therefore, at this time, no country, no matter how developed, cannot meet all its economic needs on its own. It has to meet most of its needs with the help of other countries. This mutual dependence of nations is the basis of international trade.

Differance b/w International and Domestic Trade

Although the basic principles of international trade and domestic trade are the same. That is, both come into existence as a result of division of work and specialization. However, there are some differences between them. Here are some of those aspects.

Difference between mobility of labor and capital:

Labor and capital are highly mobile within the country. Both these factors can be moved from one place to another when needed. Hence their wages remain the same with minor differences at different places and as a result there is not much difference in the cost of production of the goods. Unlike the domestic level, the mobility of labor and capital is very low at the international level. Difficulties in the form of foreign laws, alienation of language and customs, love of loved ones and foreign environment stand in the way of moving labor. While the government's policies and economic and political changes hinder the movement of capital.
Therefore, this difference in the mobility of labor and capital at the domestic and international level leads to different production costs of goods in different countries.

Implementation of various restrictions:

International trade is not free from various restrictions like domestic trade. Because it faces many restrictions as per the trade policy of the government. For example

• Enforcement of import and export taxes.
• Limitation of import of certain goods.
• Imposition of heavy tax or Restriction on import of certain goods due to provision of protection privileges.
• Difficulties in obtaining foreign exchange.
• Restriction on import and export licenses.

Because international trade faces these restrictions, it is not as free as domestic trade.

Balance of payments problem due to different monetary systems and currencies:

Since different countries of the world have different currencies, different currencies are used for payments and receipts in international trade. Because the currency system of each country is also almost different from each other. This necessitates mutual exchange of currencies. Therefore, due to different currencies, balance of payments problem arises in international trade. A country whose balance of payments becomes highly unfavorable. It has to depreciate the external value of its currency. Unlike international trade, the country does not face any such problem in domestic trade.

Provision of concessions for the manufacture of goods:

The government provides many incentives and facilities at the national level to promote and encourage the production of goods. For example, it gives tax exemptions to employers. Provides protection to protect domestic production from foreign competition. It provides electricity and gas etc. at discounted rates. Since such facilities are not provided in international trade, the cost of production varies.

Knowledge of trade conditions:

Traders transacting domestic trade are well aware of the demand for goods. Therefore, they arrange the supply of goods in view of the nature of the demand. But in international trade, it is very difficult to be well aware of the trade conditions.

Importance of international trade

Allah Almighty has given different types of means and resources to different countries in the form of physical division of the world. For example, South Africa owns diamond mines. California, Alaska and South Africa contain most of the world's gold wealth. Saudi Arabia, the United States, Russia and Mexico own most of the world's oil production. The countries of Malaya, East Indies and Bolivia have monopolies in iron ore production. Apart from differences in mineral distribution, different countries also differ from each other due to climate and soil fertility. This difference has given them a monopoly position in the agricultural production of various goods. For example, Africa is leading in the production of ivory, East Indies in rubber, Japan in silk, China in rice, Brazil in coffee, Cuba in sugar, America in cotton and Bangladesh in fiber (Jute) production. In this way, nature has given different sources to different countries, but their needs are almost the same. Therefore, Due to international trade, it has become possible for each country to benefit from the sources and resources of other countries. Every country that is self-sufficient in the production of a particular commodity imports its necessary goods from other countries because of its export. we can sell
our extra resources and purchase our needs from international market
. If international trade did not exist, those countries which have been blessed by nature with some special wealth would not be able to take full advantage of it.

Just as nature has blessed different countries with the wealth of different sources and resources, in the same way, it has given different technical, mental and physical abilities to the inhabitants of different countries. Differences in mental and physical abilities of people of different countries are the result of the specific climate of each country. For example, the British are the best shippers. Americans and Germans are among the smartest and most intelligent engineers. French are recognized as the best artist. Therefore, due to international trade, it is also possible to benefit from the human resources of other countries. As a result, the country's natural resources can be utilized in the best possible way. For example, if I give my example, we see that nature has given Pakistan an abundant wealth of natural resources, but due to the lack of quality of its human resources, it takes advantage of these natural resources by hiring competent people from other countries. Attempts are being made. The completion of great water projects like Mangala Dam, Tarbela Dam, Warsak Dam, with which the prosperity of Pakistan is connected, has been possible only with the help of human resources from other countries.

The population of every country has grown so much that it has become very difficult for the resources there to meet their needs. International trade helps a lot to overcome this problem. For example, if I give my example. So we see that the population of Pakistan has increased so much that it has to face various problems in terms of meeting its food needs with the help of domestic sources. To overcome this problem, Pakistan exports agricultural, industrial and handicraft products from its own needs and in return, grains are exported from other countries.