International trade can be termed as an exchange of services as well as goods between the countries or the international boundaries. The trade of the nations emerged during the ancient times. The international trade comes with a significant influence when it comes to knowing the political, cultural as well as socio-economic scene of a nation.
International trade between countries can be influenced by the existing bilateral relations of the countries. On the early times, the international trade was regulated and also was under the influence of high tariffs. During this period, countries adopted the policy of mercantilism that is the inflow of the capital determined the prosperity of the nation. However, with globalization and industrialization during the 19th century, these regulations got relaxed and there was the adoption of free trade. Through this model, the trade isn’t regulated by any type of government-imposed restrictions including taxes as well as tariffs. The economically-powerful and developed nations that include the UK, Europe and US have been considered the strongest advocates of such policy.
There are so many theories which are in practice for such purpose of knowing the tariffs as well as the patterns of international trade. However, the gravity model of the trade presents that more detailed analysis regarding the trading pattern in various parts of the world. Through this model, the geographical distance of countries and also their economic sizes are taken into account while creating the analysis.
In the current scenario, the international trade is made by the guidelines which were established by the WTO or the World Trade Organization. But, the trade between the two countries is being influenced by the economic treaties of the countries. There are some of these agreements which include NAFTA between countries.
Despite of the regulations involved in the process, international trade still offers different potential risks at the economic and political fronts. There are those that would include the cancellation of the international export or the import of licenses, the risks involved because of war and also the risk of imposing a ban on the important products following the shipment of consignment and currency exchange controls.
Due to international trade, you are allowed to expand the markets for both services and goods which otherwise may not have been available to you. This is the main reason why you would choose between Japanese, American or the German car. Because of international trade, the market has greater competition and this means there are more competitive costs that brings a much cheaper product home to the consumer. The international trade offers such rise in the world economy wherein the costs of the supply and the demand would affect and also get affected by those global events.