International trade is the exchange of goods, services, and capital across national borders, allowing countries to specialise according to comparative advantage and access markets, inputs, and resources beyond their own economies. It is governed by tariffs, trade agreements, and institutions such as the World Trade Organization, and is recorded in the balance of payments. It is a primary driver of economic growth and global interdependence.
Overview
- Trade arises because countries differ in endowments, technology, and costs, so exchange raises aggregate welfare relative to autarky.
- Flows are shaped by tariffs, quotas, exchange rates, and agreements, and are overseen multilaterally by the World Trade Organization.
- Exports and imports feed directly into national accounts and the Balance of Payments.
Key aspects
- Comparative advantage as the core gains-from-trade principle.
- Exports, imports, and the resulting trade balance.
- Tariffs, trade agreements, and customs procedures.
- Deep linkage to global Supply Chain networks.
Mechanisms
- Bilateral and multilateral trade agreements lowering barriers.
- Customs valuation, classification, and clearance via Customs.
- Exchange-rate adjustment affecting competitiveness.
- Dispute settlement under the World Trade Organization.
Applications
- Driving Economic Growth through market access and specialisation.
- Coordinating cross-border Supply Chain sourcing.
- Informing trade and industrial policy.
- Contributing net exports to Gross Domestic Product.