Introduction

International trade is the exchange of capital, goods, and services across international
borders or territories. In most countries, such trade represents a significant share of gross
domestic product (GDP). While international trade has been present throughout much of
history (see Silk Road, Amber Road), its economic, social, and political importance has
been on the rise in recent centuries. It is the presupposition of international trade that a
sufficient level of geopolitical peace and stability are prevailing in order to allow for the
peaceful exchange of trade and commerce to take place between nations
Industrialization, advanced in technology transportation, globalization, multinational
corporations, and outsourcing are all having a major impact on the international trade
system. Increasing international trade is crucial to the continuance of globalization.
Without international trade, nations would be limited to the goods and services produced
within their own borders. International trade is, in principle, not different from domestic
trade as the motivation and the behavior of parties involved in a trade do not change
fundamentally regardless of whether trade is across a border or not. The main difference
is that international trade is typically more costly than domestic trade. The reason is that a
border typically imposes additional costs such as tariffs, time costs due to border delays
and costs associated with country differences such as language, the legal system or
culture.
Another difference between domestic and international trade is that factors of production
such as capital and labor are typically more mobile within a country than across
countries. Thus international trade is mostly restricted to trade in goods and services, and
only to a lesser extent to trade in capital, labor or other factors of production. Trade in
goods and services can serve as a substitute for trade in factors of production. Instead of
importing a factor of production, a country can import goods that make intensive use of
that factor of production and thus embody it. An example is the import of labor-intensive
goods by the United States from China. Instead of importing Chinese labor, the United
States imports goods that were produced with Chinese labor.

Objectives of the study

To Study likely trends in world trade and how current and future economic, social
and political factors might weigh on these trends.
To discuss trends in international trade in goods and services and various
components within these sectors
To understand the role and contribution of international trade in the global
economy
Methods of Research
This data has been collected by secondary sources such as Books, News Papers,
Google Search, Magazines and e-data.
Significance of the study
The significance of the study includes that why international trade is important in
today world
The buying and selling of goods and services across national borders is known as
international trade. International trade is the backbone of our modern, commercial
world, as producers in various nations try to profit from an expanded market, rather
than be limited to selling within their own borders. There are many reasons that trade
across national borders occurs, including lower production costs in one region versus
another, specialized industries, lack or surplus of natural resources and consumer
tastes. One of the most controversial components of international trade today is the
lower production costs of "developing" nations. There is currently a great deal of
concern over jobs being taken away from the United States, member countries of the
European Union and other "developed" nations as countries such as China, Korea,
India, Indonesia and others produce goods and services at much lower costs. Both the
United States and the European Union have imposed severe restrictions on imports
from Asian nations to try to stem this tide. Clearly, a company that can pay its
workers the equivalent of dollars a day, as compared to dollars an hour, has a distinct
selling advantage. Nevertheless, American and European consumers are only too
happy to lower their costs of living by taking advantage of cheaper, imported goods

Even though many consumers prefer to buy less expensive goods, some international
trade is fostered by a specialized industry that has developed due to national talent
and/or tradition. Swiss watches, for example, will never be price-competitive with
mass produced watches from Asia. Regardless, there is a strong market among certain
consumer groups for the quality, endurance and even "snob appeal" that owning a
Rolex, Patek-Philippe or Audemars Piguet offers. German cutlery, English bone
China, Scottish wool, fine French silks such as Hermes and other such products
always find their way onto the international trade scene because consumers in many
parts of the world are willing to foster the importation of these goods to satisfy their
concept that certain countries are the best at making certain goods.
One of the biggest components of international trade, both in terms of volume and
value of goods is oil. Total net oil imports in 2005 are over 26 million barrels per day
(U.S. Energy Information Administration figures) (Note: Imports include crude oil,
natural gas liquids, and refined products.) At a recent average of $50 per barrel, that
translates to $1billion, three hundred million, PER DAY. The natural resources of a
handful of nations, most notably the nations of OPEC, the Organization of Petroleum
Exporting Countries, are swept onto the international trade scene in staggering
numbers each day, and consumer nations continue to absorb this flow. Other natural
resources contribute to the movement of international trade, but none to the extent of
the oil trade. Diamonds from Africa, both for industrial and jewelry use, wheat and
other agricultural products from the United States and Australia, coal and steel from
Canada and Russia, all flow across borders from these nations that have the natural
resources to the nations that lack them.
Chapter Scheme
This study consists of the following chapters:
Chapter 1: Introduction
Chapter 2: International Trade
Chapter 3: Trends and recent trend in International Trade
Chapter 4: Conclusion

Chapter 2: International trade

Definition and Conceptual Framework
Global trade, also known as international trade, is simply the exchange of goods and
services across international boundaries.
Global trade involves the export and import of goods and services between
international borders. Goods and services that enter into a country for sale are called
imports. Goods and services that leave a country for sale in another country are called
exports. For example, a country may import wheat because it doesn't have much arable
land but export oil because it has oil in abundance.
A fundamental concept underlying global trade is the concept of comparative
advantage developed by David Ricardo in the 19th century. In a nutshell, the doctrine
of comparative advantage states that a country can produce some goods or services
more cheaply than other countries. In technical terms, the country is able to produce a
specific good or service at a lower opportunity cost than others.
An opportunity cost is the benefit one gives up in making an economic choice. The
classic example is 'guns and butter' - domestic investment over defense spending. The
more guns you produce, the less funds are available to invest in public schools and
infrastructure, for example. The more you invest in the domestic economy, the less you
can spend on defense.
Advantages of International Trade
The fundamental reason for international trade is to sell something that we dont need and
to buy something we do need. Trade creates jobs, attracts investments, attracts new
technology and materials, and offers Canadians a wider choice in products and services.
People spend, save, or pay taxes with the money they earn in their jobs. The government
uses taxes to provide services, which creates more jobs. When people save, the capital
markets lend money to others, who will spend it on consumer goods, or open or expand a
business, therefore creating new jobs. When people spend money, it creates demand,
which creates new jobs.

If something occurs to slow this expansion, the cycle reverses. Ex. higher taxes, higher
interest rates.
Meeting our needs
Trade is always balanced if it is fair. If 2 people trade baseball cards and one gives
another 6 cards, they should get 6 back.
Many businesses can create a surplus inventory of goods and services. Canadian farms
produce more food than Canadians can eat, Canadian manufacturers make more products
than Canadians use, and Canadian service providers can provide service to other
countries.
Canadians cannot produce fruits like bananas and oranges, and some products we cannot
make. These products are imported. Both trading partners get something they need by
trading something they dont need.
Job Creation
Unlike the battering that used to go on between trading partners, now businesses receive
money from selling their products or services to foreign businesses. When foreign
businesses buy Canadian products it creates jobs for Canadians. Exports are very
important to Canadians they create one out of three Canadian jobs. 40 percent of what
Canadians produce is exported. 1 billion exports means 6000 jobs for Canadians. When
trade is balanced businesses remain profitable and may grow.
Attracting Investment
Investment follows trade. Many foreign companies will invest in an office, factory, or
distribution warehouse to simplify their trade and reduce cost. This investment also
creates more jobs. It also attracts international investors.
New Technology & Materials
New technology promotes competitiveness and profitability. If a business could create a
machine that works better, faster, or cheaper (or all three), then the business will have
produced a more competitive product for national and international markets. The
biotechnology industry in Canada is second only to the U.S.

Disadvantages of Global Trade

The Global market has made it easy to buy and sell international goods. While this has
benefits, it also presents a problem. Such trade can cause countries to be prosperous for a
short time, but leads to economic exploitation, loss of cultural identity, and even physical
harm.
Support of Non-Democratic Systems
Great hardship can be caused when people make poor decisions about land use or surplus
production for export and do not take the general populations welfare into consideration.
For example: Landowners in Nicaragua and El Salvador want farmers to grow coffee
beans because it is a very profitable cash crop, however, the farmers would like to use the
land to grow more food for their families. The farmers wishes are ignored because they
do not actually own the land.
Cultural Identity Issues
Culture is a major export in the world. It displays and promotes values and lifestyles
worldwide. The "culture consumer" in other countries is sometimes overwhelmed by
American ideas. Products also carry cultural ideas and messages. There are values of the
culture the make the product.
For example: Coca-Cola, McDonalds, Nike, and Microsoft all sell products that
symbolize American values and symbolize and reflect American corporate culture.
Social Welfare Issues:
Maintaining safety standards, minimum wages, workers compensation and Health
benefits are all social welfare issues that cost business money. If a running shoe is made
in a country where these issues are not met than the shoe can be sold for less in Canada.
The down side to this is that substandard safety conditions cause death and injury in the
workplace.

Environmental Issues:
In Canada, businesses are urged by the government and environmental groups through
laws and regulations to keep our air, land and water clean. This is a costly process so
businesses decide to move their operations to countries; i.e. Mexico, where it is less
regulated.
Political Issues:
Precious commodities such as gold, diamond, oil or farmland are so important for
countries to have control that wars have been started and as a result people are killed.
Trade of these items has caused political alliances that do not help the people in the
trading nation but only the powerful corporations that control the co