NCERT Textbook - International Trade Humanities/Arts Notes | EduRev

Geography Class 12

Created by: Mehtab Ahmed

Humanities/Arts : NCERT Textbook - International Trade Humanities/Arts Notes | EduRev

 Page 1


Unit-III
Chapter-9
International Trade
You are already familiar with the term “trade”
as a tertiary activity which you have studied in
Chapter 7 of this book. You know that trade
means the voluntary exchange of goods and
services. Two parties are required to trade. One
person sells and the other purchases. In certain
places, people barter their goods. For both the
parties trade is mutually beneficial.
Trade may be conducted at two levels:
international and national. International trade
is the exchange of goods and services among
countries across national boundaries.
Countries need to trade to obtain commodities,
they cannot produce themselves or they can
purchase elsewhere at a lower price.
The initial form of trade in primitive
societies was the barter system, where direct
exchange of goods took place. In this system if
you were a potter and were in need of a plumber,
you would have to look for a plumber who
would be in need of pots and you could
exchange your pots for his plumbing service.
Fig. 9.1: Two women practising barter system in
Jon Beel Mela
Every January after the harvest season Jon Beel Mela
takes place in Jagiroad, 35 km away from Guwahati
and it is possibly the only fair In India, where barter
system is still alive. A big market is organised during
this fair and people from various tribes and communi-
ties exchange their products.
The difficulties of barter system were
overcome by the introduction of money. In the
olden times, before paper and coin currency
© NCERT
not to be republished
Page 2


Unit-III
Chapter-9
International Trade
You are already familiar with the term “trade”
as a tertiary activity which you have studied in
Chapter 7 of this book. You know that trade
means the voluntary exchange of goods and
services. Two parties are required to trade. One
person sells and the other purchases. In certain
places, people barter their goods. For both the
parties trade is mutually beneficial.
Trade may be conducted at two levels:
international and national. International trade
is the exchange of goods and services among
countries across national boundaries.
Countries need to trade to obtain commodities,
they cannot produce themselves or they can
purchase elsewhere at a lower price.
The initial form of trade in primitive
societies was the barter system, where direct
exchange of goods took place. In this system if
you were a potter and were in need of a plumber,
you would have to look for a plumber who
would be in need of pots and you could
exchange your pots for his plumbing service.
Fig. 9.1: Two women practising barter system in
Jon Beel Mela
Every January after the harvest season Jon Beel Mela
takes place in Jagiroad, 35 km away from Guwahati
and it is possibly the only fair In India, where barter
system is still alive. A big market is organised during
this fair and people from various tribes and communi-
ties exchange their products.
The difficulties of barter system were
overcome by the introduction of money. In the
olden times, before paper and coin currency
© NCERT
not to be republished
Fundamentals of Human Geography 82
came into being, rare objects with very high
intrinsic value served as money, like,
flintstones, obsidian, cowrie shells, tiger’s
paws, whale’s teeth, dogs teeth, skins, furs,
cattle, rice, peppercorns, salt, small tools,
copper, silver and gold.
The word salary comes from the Latin word Salarium
which means payment by salt. As in those times
producing salt from sea water was unknown and could
only be made from rock salt which was rare and
expensive. That is why it became a mode of payment.
HIST HIST HIST HIST HISTOR OR OR OR ORY OF INTERN Y OF INTERN Y OF INTERN Y OF INTERN Y OF INTERNAAAAATION TION TION TION TIONAL AL AL AL AL
TRADE TRADE TRADE TRADE TRADE
In ancient times, transporting goods over long
distances was risky, hence trade was restricted
to local markets. People then spent most of their
resources on basic necessities – food and
clothes. Only the rich people bought jewellery,
costly dresses and this resulted in trade of
luxury items.
The Silk Route is an early example of long
distance trade connecting Rome to China –
along the 6,000 km route. The traders
transported Chinese silk, Roman wool and
precious metals and many other high value
commodities from intermediate points in India,
Persia and Central Asia.
After the disintegration of the Roman
Empire, European commerce grew during
twelfth and thirteenth century with the
development of ocean going warships trade
between Europe and Asia grew and the
Americas were discovered.
Fifteenth century onwards, the European
colonialism began and along with trade of exotic
commodities, a new form of trade emerged
which was called slave trade. The Portuguese,
Dutch, Spaniards, and British captured African
natives and forcefully transported them to the
newly discovered Americas for their labour in
the plantations. Slave trade was a lucrative
business for more than two hundred years till
it was abolished in Denmark in 1792, Great
Britain in 1807 and United States in 1808.
Figure 9.2 : Advertisement for Slave Auction, 1829
This American slave auction advertised slaves for sale
or temporary hire by their owners. Buyers often paid as
much as $2,000 for a skilled, healthy slave. Such auc-
tions often sep arated family members from one another ,
many of whom never saw their loved ones again.
After the Industrial Revolution the demand
for raw materials like grains, meat, wool also
expanded, but their monetary value declined
in relation to the manufactured goods.
The industrialised nations imported
primary products as raw materials and
exported the value added finished products
back to the non-industrialised nations.
In the later half of the nineteenth century,
regions producing primary goods were no more
important, and industrial nations became each
other’s principle customers.
During the World Wars I and II, countries
imposed trade taxes and quantitative
restrictions for the first time. During the post-
war period, organisations like General
Agreement for Tariffs and Trade (which later
became the World Trade Organisation), helped
in reducing tariff.
Why Does International Trade Exist?
International trade is the result of specialisation
© NCERT
not to be republished
Page 3


Unit-III
Chapter-9
International Trade
You are already familiar with the term “trade”
as a tertiary activity which you have studied in
Chapter 7 of this book. You know that trade
means the voluntary exchange of goods and
services. Two parties are required to trade. One
person sells and the other purchases. In certain
places, people barter their goods. For both the
parties trade is mutually beneficial.
Trade may be conducted at two levels:
international and national. International trade
is the exchange of goods and services among
countries across national boundaries.
Countries need to trade to obtain commodities,
they cannot produce themselves or they can
purchase elsewhere at a lower price.
The initial form of trade in primitive
societies was the barter system, where direct
exchange of goods took place. In this system if
you were a potter and were in need of a plumber,
you would have to look for a plumber who
would be in need of pots and you could
exchange your pots for his plumbing service.
Fig. 9.1: Two women practising barter system in
Jon Beel Mela
Every January after the harvest season Jon Beel Mela
takes place in Jagiroad, 35 km away from Guwahati
and it is possibly the only fair In India, where barter
system is still alive. A big market is organised during
this fair and people from various tribes and communi-
ties exchange their products.
The difficulties of barter system were
overcome by the introduction of money. In the
olden times, before paper and coin currency
© NCERT
not to be republished
Fundamentals of Human Geography 82
came into being, rare objects with very high
intrinsic value served as money, like,
flintstones, obsidian, cowrie shells, tiger’s
paws, whale’s teeth, dogs teeth, skins, furs,
cattle, rice, peppercorns, salt, small tools,
copper, silver and gold.
The word salary comes from the Latin word Salarium
which means payment by salt. As in those times
producing salt from sea water was unknown and could
only be made from rock salt which was rare and
expensive. That is why it became a mode of payment.
HIST HIST HIST HIST HISTOR OR OR OR ORY OF INTERN Y OF INTERN Y OF INTERN Y OF INTERN Y OF INTERNAAAAATION TION TION TION TIONAL AL AL AL AL
TRADE TRADE TRADE TRADE TRADE
In ancient times, transporting goods over long
distances was risky, hence trade was restricted
to local markets. People then spent most of their
resources on basic necessities – food and
clothes. Only the rich people bought jewellery,
costly dresses and this resulted in trade of
luxury items.
The Silk Route is an early example of long
distance trade connecting Rome to China –
along the 6,000 km route. The traders
transported Chinese silk, Roman wool and
precious metals and many other high value
commodities from intermediate points in India,
Persia and Central Asia.
After the disintegration of the Roman
Empire, European commerce grew during
twelfth and thirteenth century with the
development of ocean going warships trade
between Europe and Asia grew and the
Americas were discovered.
Fifteenth century onwards, the European
colonialism began and along with trade of exotic
commodities, a new form of trade emerged
which was called slave trade. The Portuguese,
Dutch, Spaniards, and British captured African
natives and forcefully transported them to the
newly discovered Americas for their labour in
the plantations. Slave trade was a lucrative
business for more than two hundred years till
it was abolished in Denmark in 1792, Great
Britain in 1807 and United States in 1808.
Figure 9.2 : Advertisement for Slave Auction, 1829
This American slave auction advertised slaves for sale
or temporary hire by their owners. Buyers often paid as
much as $2,000 for a skilled, healthy slave. Such auc-
tions often sep arated family members from one another ,
many of whom never saw their loved ones again.
After the Industrial Revolution the demand
for raw materials like grains, meat, wool also
expanded, but their monetary value declined
in relation to the manufactured goods.
The industrialised nations imported
primary products as raw materials and
exported the value added finished products
back to the non-industrialised nations.
In the later half of the nineteenth century,
regions producing primary goods were no more
important, and industrial nations became each
other’s principle customers.
During the World Wars I and II, countries
imposed trade taxes and quantitative
restrictions for the first time. During the post-
war period, organisations like General
Agreement for Tariffs and Trade (which later
became the World Trade Organisation), helped
in reducing tariff.
Why Does International Trade Exist?
International trade is the result of specialisation
© NCERT
not to be republished
International Trade     83
in production. It benefits the world economy if
different countries practise specialisation and
division of labour in the production of
commodities or provision of services. Each kind
of specialisation can give rise to trade. Thus,
international trade is based on the principle of
comparative advantage, complimentarity and
transferability of goods and services and in
principle, should be mutually beneficial to the
trading partners.
In modern times, trade is the basis of the
world’s economic organisation and is related
to the foreign policy of nations. With well-
developed transportation and communication
systems, no country is willing to forego the
benefits derived from participation in
international trade.
Basis of International Trade
(i) Difference in national resources: The
world’s national resources are unevenly
distributed because of differences in their
physical make up i.e. geology, relief soil
and climate.
(a) Geological structure: It determines
the mineral resource base and
topographical differences ensure
diversity of crops and animals
raised. Lowlands have greater
agricultural potential. Mountains
attract tourists and promote
tourism.
(b) Mineral resources: They are
unevenly distributed the world over.
The availability of mineral resources
provides the basis for industrial
development.
(c) Climate: It influences the type of flora
and fauna that can survive in a given
region. It also ensures diversity in
the range of various products, e.g.
wool production can take place in
cold regions, bananas, rubber and
cocoa can grow in tropical regions.
(ii) Population factors: The size, distribution
and diversity of people between countries
affect the type and volume of goods
traded.
(a) Cultural factors: Distinctive forms of
art and craft develop in certain
cultures which are valued the world
over, e.g. China produces the finest
porcelains and brocades. Carpets of
Iran are famous while North African
leather work and Indonesian batik
cloth are prized handicrafts.
(b) Size of population: Densely
populated countries have large
volume of internal trade but little
external trade because most of the
agricultural and industrial
production is consumed in the local
markets. Standard of living of the
population determines the demand
for better quality imported products
because with low standard of living
only a few people can afford to buy
costly imported goods.
(iii) Stage of economic development: At
different stages of economic development
of countries, the nature of items traded
undergo changes. In agriculturally
important countries, agro products are
exchanged for manufactured goods
whereas industrialised nations export
machinery and finished products and
import food grains and other raw
materials.
(iv) Extent of foreign investment: Foreign
investment can boost trade in developing
countries which lack in capital required
for the development of mining, oil drilling,
heavy engineering, lumbering and
plantation agriculture. By developing
such capital intensive industries in
developing countries, the industrial
nations ensure import of food stuffs,
minerals and create markets for their
finished products. This entire cycle steps
up the volume of trade between nations.
(v) T ransport: In olden times, lack of
adequate and efficient means of transport
restricted trade to local areas. Only high
value items, e.g. gems, silk and spices
were traded over long distances. With
expansions of rail, ocean and air
transport, better means of refrigeration
and preservation, trade has experienced
spatial expansion.
© NCERT
not to be republished
Page 4


Unit-III
Chapter-9
International Trade
You are already familiar with the term “trade”
as a tertiary activity which you have studied in
Chapter 7 of this book. You know that trade
means the voluntary exchange of goods and
services. Two parties are required to trade. One
person sells and the other purchases. In certain
places, people barter their goods. For both the
parties trade is mutually beneficial.
Trade may be conducted at two levels:
international and national. International trade
is the exchange of goods and services among
countries across national boundaries.
Countries need to trade to obtain commodities,
they cannot produce themselves or they can
purchase elsewhere at a lower price.
The initial form of trade in primitive
societies was the barter system, where direct
exchange of goods took place. In this system if
you were a potter and were in need of a plumber,
you would have to look for a plumber who
would be in need of pots and you could
exchange your pots for his plumbing service.
Fig. 9.1: Two women practising barter system in
Jon Beel Mela
Every January after the harvest season Jon Beel Mela
takes place in Jagiroad, 35 km away from Guwahati
and it is possibly the only fair In India, where barter
system is still alive. A big market is organised during
this fair and people from various tribes and communi-
ties exchange their products.
The difficulties of barter system were
overcome by the introduction of money. In the
olden times, before paper and coin currency
© NCERT
not to be republished
Fundamentals of Human Geography 82
came into being, rare objects with very high
intrinsic value served as money, like,
flintstones, obsidian, cowrie shells, tiger’s
paws, whale’s teeth, dogs teeth, skins, furs,
cattle, rice, peppercorns, salt, small tools,
copper, silver and gold.
The word salary comes from the Latin word Salarium
which means payment by salt. As in those times
producing salt from sea water was unknown and could
only be made from rock salt which was rare and
expensive. That is why it became a mode of payment.
HIST HIST HIST HIST HISTOR OR OR OR ORY OF INTERN Y OF INTERN Y OF INTERN Y OF INTERN Y OF INTERNAAAAATION TION TION TION TIONAL AL AL AL AL
TRADE TRADE TRADE TRADE TRADE
In ancient times, transporting goods over long
distances was risky, hence trade was restricted
to local markets. People then spent most of their
resources on basic necessities – food and
clothes. Only the rich people bought jewellery,
costly dresses and this resulted in trade of
luxury items.
The Silk Route is an early example of long
distance trade connecting Rome to China –
along the 6,000 km route. The traders
transported Chinese silk, Roman wool and
precious metals and many other high value
commodities from intermediate points in India,
Persia and Central Asia.
After the disintegration of the Roman
Empire, European commerce grew during
twelfth and thirteenth century with the
development of ocean going warships trade
between Europe and Asia grew and the
Americas were discovered.
Fifteenth century onwards, the European
colonialism began and along with trade of exotic
commodities, a new form of trade emerged
which was called slave trade. The Portuguese,
Dutch, Spaniards, and British captured African
natives and forcefully transported them to the
newly discovered Americas for their labour in
the plantations. Slave trade was a lucrative
business for more than two hundred years till
it was abolished in Denmark in 1792, Great
Britain in 1807 and United States in 1808.
Figure 9.2 : Advertisement for Slave Auction, 1829
This American slave auction advertised slaves for sale
or temporary hire by their owners. Buyers often paid as
much as $2,000 for a skilled, healthy slave. Such auc-
tions often sep arated family members from one another ,
many of whom never saw their loved ones again.
After the Industrial Revolution the demand
for raw materials like grains, meat, wool also
expanded, but their monetary value declined
in relation to the manufactured goods.
The industrialised nations imported
primary products as raw materials and
exported the value added finished products
back to the non-industrialised nations.
In the later half of the nineteenth century,
regions producing primary goods were no more
important, and industrial nations became each
other’s principle customers.
During the World Wars I and II, countries
imposed trade taxes and quantitative
restrictions for the first time. During the post-
war period, organisations like General
Agreement for Tariffs and Trade (which later
became the World Trade Organisation), helped
in reducing tariff.
Why Does International Trade Exist?
International trade is the result of specialisation
© NCERT
not to be republished
International Trade     83
in production. It benefits the world economy if
different countries practise specialisation and
division of labour in the production of
commodities or provision of services. Each kind
of specialisation can give rise to trade. Thus,
international trade is based on the principle of
comparative advantage, complimentarity and
transferability of goods and services and in
principle, should be mutually beneficial to the
trading partners.
In modern times, trade is the basis of the
world’s economic organisation and is related
to the foreign policy of nations. With well-
developed transportation and communication
systems, no country is willing to forego the
benefits derived from participation in
international trade.
Basis of International Trade
(i) Difference in national resources: The
world’s national resources are unevenly
distributed because of differences in their
physical make up i.e. geology, relief soil
and climate.
(a) Geological structure: It determines
the mineral resource base and
topographical differences ensure
diversity of crops and animals
raised. Lowlands have greater
agricultural potential. Mountains
attract tourists and promote
tourism.
(b) Mineral resources: They are
unevenly distributed the world over.
The availability of mineral resources
provides the basis for industrial
development.
(c) Climate: It influences the type of flora
and fauna that can survive in a given
region. It also ensures diversity in
the range of various products, e.g.
wool production can take place in
cold regions, bananas, rubber and
cocoa can grow in tropical regions.
(ii) Population factors: The size, distribution
and diversity of people between countries
affect the type and volume of goods
traded.
(a) Cultural factors: Distinctive forms of
art and craft develop in certain
cultures which are valued the world
over, e.g. China produces the finest
porcelains and brocades. Carpets of
Iran are famous while North African
leather work and Indonesian batik
cloth are prized handicrafts.
(b) Size of population: Densely
populated countries have large
volume of internal trade but little
external trade because most of the
agricultural and industrial
production is consumed in the local
markets. Standard of living of the
population determines the demand
for better quality imported products
because with low standard of living
only a few people can afford to buy
costly imported goods.
(iii) Stage of economic development: At
different stages of economic development
of countries, the nature of items traded
undergo changes. In agriculturally
important countries, agro products are
exchanged for manufactured goods
whereas industrialised nations export
machinery and finished products and
import food grains and other raw
materials.
(iv) Extent of foreign investment: Foreign
investment can boost trade in developing
countries which lack in capital required
for the development of mining, oil drilling,
heavy engineering, lumbering and
plantation agriculture. By developing
such capital intensive industries in
developing countries, the industrial
nations ensure import of food stuffs,
minerals and create markets for their
finished products. This entire cycle steps
up the volume of trade between nations.
(v) T ransport: In olden times, lack of
adequate and efficient means of transport
restricted trade to local areas. Only high
value items, e.g. gems, silk and spices
were traded over long distances. With
expansions of rail, ocean and air
transport, better means of refrigeration
and preservation, trade has experienced
spatial expansion.
© NCERT
not to be republished
Fundamentals of Human Geography 84
Important Aspects of International
Trade
International trade has three very important
aspects. These are volume, sectoral composition
and direction of trade.
Volume of Trade
The actual tonnage of goods traded makes up
the volume. However, services traded cannot be
measured in tonnage. Therefore, the total value
of goods and services traded is considered to
be the volume of trade. Table 9.1 shows that
the total volume of world trade has been steadily
rising over the past decades.
Why do you think that the volume of trade has increased
over the decades? Can these figures be compared?
What has been the growth in the year 2010 over the
year 1955?
Composition of Trade
The nature of goods and services imported and
exported by countries have undergone changes
during the last century.
Trade of primary products was dominant
in the beginning of the last century. Later
manufactured goods gained prominence and
currently, though the manufacturing sector
commands the bulk of the global trade, service
sector which includes travel, transportation and
other commercial services have been showing
an upward trend. Table 9.1 shows that the
volume of imports and exports of the world
merchandise has been growing consistently
over the years.
Looking at the Table 9.2, we find that
agricultural products, fuels and mining
products, fuels, manufactures, iron and steel,
chemicals, office and telecom equipment,
automotive products, textiles and clothing are
major merchandise which are traded over the
world. Trade in the service sector is quite
Table 9.1: World Imports and Exports (in millions of U.S. $)
1955 1965 1975 1985 1995 2005 2010
Exports 95000 190000 877000 1954000 5162000 10393000 14850565
Total Merchandise
Imports 99000 199000 912000 2015000 5292000 10753000 15076522
Total Merchandise
Source: www.wto.org (May 2012)
Table 9.2: World Merchandise Exports by Major Product Group, 2010
(Billion dollars and percentage)
Value Share Annual Percentage Change
In World 1980- 1985- 1990- 1995- 2000- 2005- 2008 2009 2010
Merchandise 1985 1990 1995 2000 2005 2010
Trade
Agricultural Products 1362 9.2 -2 9 7 -1 9 10 19 -12 15
Fuels and Mining 3026 20.4 -5 3 2 10 16 11 33 -36 33
Products
Fuels 2348 15.8 -5 0 1 12 17 10 41 -37 30
Manufactures 9962 67.1 2 15 9 5 9 6 10 -20 20
Iron and Steel 421 2.8 -2 9 8 -2 17 6 22 -45 29
Chemicals 1705 11.5 1 14 10 4 13 9 13 -14 18
© NCERT
not to be republished
Page 5


Unit-III
Chapter-9
International Trade
You are already familiar with the term “trade”
as a tertiary activity which you have studied in
Chapter 7 of this book. You know that trade
means the voluntary exchange of goods and
services. Two parties are required to trade. One
person sells and the other purchases. In certain
places, people barter their goods. For both the
parties trade is mutually beneficial.
Trade may be conducted at two levels:
international and national. International trade
is the exchange of goods and services among
countries across national boundaries.
Countries need to trade to obtain commodities,
they cannot produce themselves or they can
purchase elsewhere at a lower price.
The initial form of trade in primitive
societies was the barter system, where direct
exchange of goods took place. In this system if
you were a potter and were in need of a plumber,
you would have to look for a plumber who
would be in need of pots and you could
exchange your pots for his plumbing service.
Fig. 9.1: Two women practising barter system in
Jon Beel Mela
Every January after the harvest season Jon Beel Mela
takes place in Jagiroad, 35 km away from Guwahati
and it is possibly the only fair In India, where barter
system is still alive. A big market is organised during
this fair and people from various tribes and communi-
ties exchange their products.
The difficulties of barter system were
overcome by the introduction of money. In the
olden times, before paper and coin currency
© NCERT
not to be republished
Fundamentals of Human Geography 82
came into being, rare objects with very high
intrinsic value served as money, like,
flintstones, obsidian, cowrie shells, tiger’s
paws, whale’s teeth, dogs teeth, skins, furs,
cattle, rice, peppercorns, salt, small tools,
copper, silver and gold.
The word salary comes from the Latin word Salarium
which means payment by salt. As in those times
producing salt from sea water was unknown and could
only be made from rock salt which was rare and
expensive. That is why it became a mode of payment.
HIST HIST HIST HIST HISTOR OR OR OR ORY OF INTERN Y OF INTERN Y OF INTERN Y OF INTERN Y OF INTERNAAAAATION TION TION TION TIONAL AL AL AL AL
TRADE TRADE TRADE TRADE TRADE
In ancient times, transporting goods over long
distances was risky, hence trade was restricted
to local markets. People then spent most of their
resources on basic necessities – food and
clothes. Only the rich people bought jewellery,
costly dresses and this resulted in trade of
luxury items.
The Silk Route is an early example of long
distance trade connecting Rome to China –
along the 6,000 km route. The traders
transported Chinese silk, Roman wool and
precious metals and many other high value
commodities from intermediate points in India,
Persia and Central Asia.
After the disintegration of the Roman
Empire, European commerce grew during
twelfth and thirteenth century with the
development of ocean going warships trade
between Europe and Asia grew and the
Americas were discovered.
Fifteenth century onwards, the European
colonialism began and along with trade of exotic
commodities, a new form of trade emerged
which was called slave trade. The Portuguese,
Dutch, Spaniards, and British captured African
natives and forcefully transported them to the
newly discovered Americas for their labour in
the plantations. Slave trade was a lucrative
business for more than two hundred years till
it was abolished in Denmark in 1792, Great
Britain in 1807 and United States in 1808.
Figure 9.2 : Advertisement for Slave Auction, 1829
This American slave auction advertised slaves for sale
or temporary hire by their owners. Buyers often paid as
much as $2,000 for a skilled, healthy slave. Such auc-
tions often sep arated family members from one another ,
many of whom never saw their loved ones again.
After the Industrial Revolution the demand
for raw materials like grains, meat, wool also
expanded, but their monetary value declined
in relation to the manufactured goods.
The industrialised nations imported
primary products as raw materials and
exported the value added finished products
back to the non-industrialised nations.
In the later half of the nineteenth century,
regions producing primary goods were no more
important, and industrial nations became each
other’s principle customers.
During the World Wars I and II, countries
imposed trade taxes and quantitative
restrictions for the first time. During the post-
war period, organisations like General
Agreement for Tariffs and Trade (which later
became the World Trade Organisation), helped
in reducing tariff.
Why Does International Trade Exist?
International trade is the result of specialisation
© NCERT
not to be republished
International Trade     83
in production. It benefits the world economy if
different countries practise specialisation and
division of labour in the production of
commodities or provision of services. Each kind
of specialisation can give rise to trade. Thus,
international trade is based on the principle of
comparative advantage, complimentarity and
transferability of goods and services and in
principle, should be mutually beneficial to the
trading partners.
In modern times, trade is the basis of the
world’s economic organisation and is related
to the foreign policy of nations. With well-
developed transportation and communication
systems, no country is willing to forego the
benefits derived from participation in
international trade.
Basis of International Trade
(i) Difference in national resources: The
world’s national resources are unevenly
distributed because of differences in their
physical make up i.e. geology, relief soil
and climate.
(a) Geological structure: It determines
the mineral resource base and
topographical differences ensure
diversity of crops and animals
raised. Lowlands have greater
agricultural potential. Mountains
attract tourists and promote
tourism.
(b) Mineral resources: They are
unevenly distributed the world over.
The availability of mineral resources
provides the basis for industrial
development.
(c) Climate: It influences the type of flora
and fauna that can survive in a given
region. It also ensures diversity in
the range of various products, e.g.
wool production can take place in
cold regions, bananas, rubber and
cocoa can grow in tropical regions.
(ii) Population factors: The size, distribution
and diversity of people between countries
affect the type and volume of goods
traded.
(a) Cultural factors: Distinctive forms of
art and craft develop in certain
cultures which are valued the world
over, e.g. China produces the finest
porcelains and brocades. Carpets of
Iran are famous while North African
leather work and Indonesian batik
cloth are prized handicrafts.
(b) Size of population: Densely
populated countries have large
volume of internal trade but little
external trade because most of the
agricultural and industrial
production is consumed in the local
markets. Standard of living of the
population determines the demand
for better quality imported products
because with low standard of living
only a few people can afford to buy
costly imported goods.
(iii) Stage of economic development: At
different stages of economic development
of countries, the nature of items traded
undergo changes. In agriculturally
important countries, agro products are
exchanged for manufactured goods
whereas industrialised nations export
machinery and finished products and
import food grains and other raw
materials.
(iv) Extent of foreign investment: Foreign
investment can boost trade in developing
countries which lack in capital required
for the development of mining, oil drilling,
heavy engineering, lumbering and
plantation agriculture. By developing
such capital intensive industries in
developing countries, the industrial
nations ensure import of food stuffs,
minerals and create markets for their
finished products. This entire cycle steps
up the volume of trade between nations.
(v) T ransport: In olden times, lack of
adequate and efficient means of transport
restricted trade to local areas. Only high
value items, e.g. gems, silk and spices
were traded over long distances. With
expansions of rail, ocean and air
transport, better means of refrigeration
and preservation, trade has experienced
spatial expansion.
© NCERT
not to be republished
Fundamentals of Human Geography 84
Important Aspects of International
Trade
International trade has three very important
aspects. These are volume, sectoral composition
and direction of trade.
Volume of Trade
The actual tonnage of goods traded makes up
the volume. However, services traded cannot be
measured in tonnage. Therefore, the total value
of goods and services traded is considered to
be the volume of trade. Table 9.1 shows that
the total volume of world trade has been steadily
rising over the past decades.
Why do you think that the volume of trade has increased
over the decades? Can these figures be compared?
What has been the growth in the year 2010 over the
year 1955?
Composition of Trade
The nature of goods and services imported and
exported by countries have undergone changes
during the last century.
Trade of primary products was dominant
in the beginning of the last century. Later
manufactured goods gained prominence and
currently, though the manufacturing sector
commands the bulk of the global trade, service
sector which includes travel, transportation and
other commercial services have been showing
an upward trend. Table 9.1 shows that the
volume of imports and exports of the world
merchandise has been growing consistently
over the years.
Looking at the Table 9.2, we find that
agricultural products, fuels and mining
products, fuels, manufactures, iron and steel,
chemicals, office and telecom equipment,
automotive products, textiles and clothing are
major merchandise which are traded over the
world. Trade in the service sector is quite
Table 9.1: World Imports and Exports (in millions of U.S. $)
1955 1965 1975 1985 1995 2005 2010
Exports 95000 190000 877000 1954000 5162000 10393000 14850565
Total Merchandise
Imports 99000 199000 912000 2015000 5292000 10753000 15076522
Total Merchandise
Source: www.wto.org (May 2012)
Table 9.2: World Merchandise Exports by Major Product Group, 2010
(Billion dollars and percentage)
Value Share Annual Percentage Change
In World 1980- 1985- 1990- 1995- 2000- 2005- 2008 2009 2010
Merchandise 1985 1990 1995 2000 2005 2010
Trade
Agricultural Products 1362 9.2 -2 9 7 -1 9 10 19 -12 15
Fuels and Mining 3026 20.4 -5 3 2 10 16 11 33 -36 33
Products
Fuels 2348 15.8 -5 0 1 12 17 10 41 -37 30
Manufactures 9962 67.1 2 15 9 5 9 6 10 -20 20
Iron and Steel 421 2.8 -2 9 8 -2 17 6 22 -45 29
Chemicals 1705 11.5 1 14 10 4 13 9 13 -14 18
© NCERT
not to be republished
International Trade     85
different from trade in the products of primary
and manufacturing sectors as the services can
be expanded infinitely, consumed by many, are
weightless and once produced, can be easily
replicated and thus, are capable of generating
more profit than producing goods.
Direction of Trade
Historically, the developing countries of the
present used to export valuable goods and
artefacts, etc., which were exported to European
countries. During the nineteenth century there
was a reversal in the direction of trade.
European countries started exporting
manufactured goods for exchange of foodstuffs
and raw materials from their colonies. Europe
and U.S.A. emerged as major trade partners in
the world and were leaders in the trade of
manufactured goods. Japan at that time was
also the third important trading country. The
world trade pattern underwent a drastic change
during the second half of the twentieth century.
Europe lost its colonies while India, China and
other developing countries started competing
with developed countries. The nature of the
goods traded has also changed.
Balance of Trade
Balance of trade records the volume of goods
and services imported as well as exported by a
country to other countries. If the value of
imports is more than the value of a country’s
exports, the country has negative or
unfavourable balance of trade. If the value of
exports is more than the value of imports, then
the country has a positive or favourable balance
of trade.
Balance of trade and balance of payments
have serious implications for a country’s
economy. A negative balance would mean that
the country spends more on buying goods than
it can earn by selling its goods. This would
ultimately lead to exhaustion of its financial
reserves.
Types of International Trade
International trade may be categorised into two
types:
(a) Bilateral trade: Bilateral trade is done
by two countries with each other. They
enter into agreement to trade specified
commodities amongst them. For
example, country A may agree to trade
some raw material with agreement to
purchase some other specified item to
country B or vice versa.
(b) Multi-lateral trade: As the term suggests
multi-lateral trade is conducted with
many trading countries. The same
country can trade with a number of
other countries. The country may also
grant the status of the “Most Favoured
Nation” (MFN) on some of the trading
partners.
Case for Free Trade
The act of opening up economies for trading is
known as free trade or trade liberalisation. This
is done by bringing down trade barriers like
tariffs. Trade liberalisation allows goods and
services from everywhere to compete with
domestic products and services.
Globalisation along with free trade can
adversely affect the economies of developing
countries by not giving equal playing field by
imposing conditions which are unfavourable.
With the development of transport and
communication systems goods and services can
travel faster and farther than ever before. But
free trade should not only let rich countries
enter the markets, but allow the developed
Office and Telecom 1603 10.8 9 18 15 10 6 5 3 -15 21
Equipment
Automotive Products 1092 7.4 5 14 8 5 10 3 3 -31 29
Textiles 251 1.7 -1 15 8 0 5 4 5 -16 19
Clothing 351 2.4 4 18 8 5 7 5 5 -13 11
Source: www.wto.org
© NCERT
not to be republished
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