What Is International Trade?

By Holly Schoch , last updated August 5, 2011

International trade encompasses such a wide array of topics that it is difficult for it to be summarized in a book let alone a short article. However, in its simplest form, international trade is the exchange of goods and services between different countries. There are a number of different organizations that help to facilitate or guide the international trade policies of foreign nations, such as the World Trade Organization and the International Monetary Fund. In the case of the United States, the federal government decides with whom we are allowed to trade and how much we are able to trade. These decisions are often based on policy implications. Cuba is a great example of a country with whom the United States is unable to trade, due to the political regime in power. International trade is one of the more heated debates on Capitol Hill and one that is forced onto the table by a number of lobbyists groups, whether it is because they are for or against international trade.

Supporters of international trade say that it increases the quality of life for all parties involved because it provides them with more avenues to sell their products while also providing individuals with products they may not have been able to receive otherwise. International trade also forces companies to become more competitive, leading to lower prices and better products. When a country begins to practice protectionism, which means they close off their borders to trade or employ tariffs or quotas to limit the amount of goods or services that are allowed to enter the country, it eventually leads to a dramatic increase in price while the quality of the product is diminished. International trade also provides countries with primary products, such as lumber, that they are unable to produce for themselves. A perfect example would be oil. Some countries have more of this natural resource than others.

However, because of international trade, countries that have little of it can still operate cars and other gas powered machinery because they can purchase this oil from other countries. Critics of international trade say that it is a zero sum game, one where the rich countries become richer and the poor countries become poorer. There has yet to be any concrete evidence that either proves or disproves this theory.

Because the world is becoming significantly smaller as globalization occurs at an ever increasing rate as a result of technological advances, international trade law has become more and more developed. While critics of international law question who as the authority to actually enforce such laws as well as the reason why a country should actually listen, in recent years international trade laws have helped to establish a basic framework for the exchange of these goods and services. International trade law helps to address issues such as customs duties, dumping, embargoes, intellectual property, free trade zones, quotas, and subsides. All of these issues can have a huge impact on international trade and the country from which the goods are either coming into or going out of.

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