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Class 12 International Trade: cheat sheet
CBSE Social Science. 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
| Balance of trade | exports − imports (positive: favourable; negative: unfavourable) |
| How much cheaper (dumping) | home price − price abroad; as % = difference ÷ home price × 100 |
| Price with a tariff | price × (100 + tariff %) ÷ 100 |
| Barter chains | pots per basket × baskets per sack = pots per sack |
| Trade blocs | generate about 52% of world trade |
| Port examples | packet stations Dover and Calais; entrepot Singapore; out port Piraeus for Athens |
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
Suppose a country’s exports and imports (₹ crore) were 34,600 and 41,400 in Year 1, and 42,800 and 67,100 in Year 2. (a) Find the trade gap each year. (b) Did it widen or narrow? (c) Why can a lasting negative balance be harmful?
Working: imports − exports each year
Answer: (a) ₹6,800 crore and ₹24,300 crore (b) widened (c) the country spends more than it earns and uses up its financial reserves
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