International Trade

Exchange between countries: barter and money, the bases of trade, balance of trade, bilateral and multilateral trade, dumping, the WTO, trade blocs and types of ports.

Key ideas

• Trade began as barter, direct exchange of goods; money removed the need for each side to want what the other offered.
• Countries trade because of differences in resources, culture, population, stage of development, foreign investment and transport.
• The balance of trade compares exports with imports: favourable when exports are worth more, unfavourable when imports are worth more.
• Bilateral trade is between two countries; multilateral trade is with many.
• Dumping is selling a good in two countries at prices that differ for reasons unrelated to cost.
• The WTO, formed on 1 January 1995 after GATT (1948), sets global trade rules and settles disputes; it is based in Geneva.
• Ports are the gateways of trade: industrial, commercial or comprehensive by cargo, and inland ports, out ports, ports of call, packet stations and entrepots by location and use.

Remember

Watch out

• Calling a balance with imports above exports favourable.
• Mixing up bilateral (two countries) and multilateral (many countries) trade.
• Confusing an out port (deep-water port for a parent port) with an inland port.

Worked example