International trade defines the exchange of goods and services between countries where the market competitive resulting in competitive pricing which brings a cheaper product home to the consumer. Historically International trade has grown remarkably in the last couple of centuries. Trading globally gives consumers and countries the opportunity to be exposed to goods and services not available in their own countries, or which would be more expensive domestically.
International trade not only results in increased efficiency but also allows countries to participate in a global economy, encouraging the opportunity for foreign direct investment (FDI), which is the amount of money that individuals invest into foreign companies and assets.
Free international trade is often seen as desirable because it allows countries to specialize, in order to produce goods that they are relatively efficient at producing, while importing other goods. This is the essence of the comparative advantage argument supporting gains from trade: exchange allows countries to “do what they do best, and import the rest”.
International trade transactions are facilitated by international financial payments, in which the private banking system and the central banks of the trading nations play important roles. The barter of goods or services among different peoples is an age-old practice, probably as old as human history. International trade, however, refers specifically to an exchange between members of different nations, and accounts.
Impact of eCommerce
Electronic commerce offers economy-wide benefits to all countries. The gains are in the short run for the developed countries but developing countries will have more to benefit in the long run. The volume of international trade will increase via e-commerce.
E-commerce has come to take on two important roles; first as a more effective and efficient conduit and aggregator of information, and second, as a potential mechanism for the replacement of many economic activities once performed within a business enterprise by those that can be done by outside suppliers that compete with each other to execute these activities.
Internet is dramatically expanding opportunities for business-to-business and business-to-consumer e-commerce transactions across borders. The Internet and e-commerce are transforming the way firms operate by redefining how back-end operations – product design and development, procurement, production, inventory, distribution, aftersales service support, and even marketing – are conducted. The end results are efficiency improvements, better asset utilization, faster time to market, reduction in total order fulfillment times, and enhanced customer service.
The use of electronic means and the internet can make the process of initiating and doing trade a lot easier, faster, and less expensive. Finding the right supplier, specifying the product’s requirements and quality, negotiating the price, arranging deliveries and marketing products is also very costly. With the internet
and e-commerce applications, a whole range of these activities can occur without having buyer and seller in close physical proximity.
E-commerce will also have a significant impact on trade in services. The most relevant change in trade in services is e-commerce’s and information technology’s ability to make non-tradable services into tradable. Activities that were previously non-tradable (i.e. research and development, computing, inventory management, quality control, accounting, personnel management, marketing, advertising and distribution) will be traded through the use of e-commerce.
The potential benefits from international e-commerce to a developing country arise from a reduction in the cost of imports as much as from an increase in the price received for exports. Even if a country does not export any services, it can benefit from imports of services, paying for them in terms of goods.
