International trade is simply defined as trade between two countries it is also referred to as foreign trade.
International trade is carried out between individuals or governments of different countries e.g. trade between a citizen of Kenya and a citizen of Uganda, or trade between the government of Kenya and the government of Ethiopia.
International trade carried out between two countries is referred to as bilateral trade for example Kenya trading with Nigeria
International trade carried out among many countries (more than two countries) is referred to as multilateral trade for example Kenya trading with Egypt, Ukraine, United States of America.
International trade involves import trade and exports trade;
- Import Trade-Which is the buying of goods and services by one country from another country or by individuals in one country from individuals in another country.
- Export Trade-Which is the sale of goods and services by a country to another country or individuals in one country to another country or individuals in one country to individuals in another country
Advantages International trade
- International trade enables a country to obtain what she does not produce
- International trade help promote peace among countries engaging in the trade
- Enables a country to fully exploit her resources due to widened market in trading with other countries
- Promotes competition between imports and locally produced goods which in effect improve the quality of goods and services produced
- International trade enables a country to dispose of its surplus products which may include agricultural produce
- International trade acts as a source of revenue for the government through taxation that comes in the form of import duty and export duty
- International trade enables a consumer to have access to a wide variety of goods to choose from hence promoting consumer sovereignty
- Sometimes it enables a country to obtain goods and services cheaply compared to when they produce them. this is usually the case where the exporting country has a competitive advantage in producing the commodity over the importing country
- International trade enables a country to specialize in the production of goods and services for which they have a competitive advantage in terms of resources and endowment
Disadvantages of international trade
The following are the limitations of international trade;
- International trade makes people of different countries interact with one another. through this interaction, people of a given country may end up acquiring cultural values from their trading partners
- International trade may lead to unfavorable balance of payment where the value of imports is more than the value of exports. this is usually the case with developing countries which normally export raw materially and import manufactured goods
- Countries that rely so much on international trade may face supply and demand challenges during emergencies and wars in the country export. this is evident during these times of the war between Ukraine and Russia where countries have witnessed supply-demand constraints due to sections in trading with Russia
- International trade may cause local industries to collapse as people tend to buy more imported products this, in turn, may lead to unemployment
- International trade could lead to unwanted and harmful products entering the country such as drugs
- Overreliance on imported products especially for essential commodities makes a country a slave of the other hence could compromise sovereignty