NCERT Textbook - International Trade | Geography Class 12 - Humanities/Arts PDF Download

 Page 1


Fundamentals of Human Geography 70
Unit-III
Chapter-8
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. 8.1: 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
Reprint 2024-25
Page 2


Fundamentals of Human Geography 70
Unit-III
Chapter-8
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. 8.1: 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
Reprint 2024-25
International Trade     71
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 INTERNA A A A ATION TION TION TION TIONAL TRADE AL TRADE AL TRADE AL TRADE AL 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 8.2 : 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 separated 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
in production. It benefits the world economy if
Reprint 2024-25
Page 3


Fundamentals of Human Geography 70
Unit-III
Chapter-8
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. 8.1: 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
Reprint 2024-25
International Trade     71
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 INTERNA A A A ATION TION TION TION TIONAL TRADE AL TRADE AL TRADE AL TRADE AL 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 8.2 : 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 separated 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
in production. It benefits the world economy if
Reprint 2024-25
Fundamentals of Human Geography 72
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) Transport: 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.
Reprint 2024-25
Page 4


Fundamentals of Human Geography 70
Unit-III
Chapter-8
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. 8.1: 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
Reprint 2024-25
International Trade     71
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 INTERNA A A A ATION TION TION TION TIONAL TRADE AL TRADE AL TRADE AL TRADE AL 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 8.2 : 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 separated 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
in production. It benefits the world economy if
Reprint 2024-25
Fundamentals of Human Geography 72
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) Transport: 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.
Reprint 2024-25
International Trade     73
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
countries to keep their own markets protected
from foreign products.
Countries also need to be cautious about
dumped goods; as along with free trade
dumped goods of cheaper prices can harm the
domestic producers.
Dumping Dumping Dumping Dumping Dumping
The practice of selling a commodity in two
countries at a price that differs for reasons
not related to costs is called dumping.
Reprint 2024-25
Page 5


Fundamentals of Human Geography 70
Unit-III
Chapter-8
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. 8.1: 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
Reprint 2024-25
International Trade     71
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 INTERNA A A A ATION TION TION TION TIONAL TRADE AL TRADE AL TRADE AL TRADE AL 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 8.2 : 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 separated 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
in production. It benefits the world economy if
Reprint 2024-25
Fundamentals of Human Geography 72
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) Transport: 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.
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International Trade     73
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
countries to keep their own markets protected
from foreign products.
Countries also need to be cautious about
dumped goods; as along with free trade
dumped goods of cheaper prices can harm the
domestic producers.
Dumping Dumping Dumping Dumping Dumping
The practice of selling a commodity in two
countries at a price that differs for reasons
not related to costs is called dumping.
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Fundamentals of Human Geography Fundamentals of Human Geography Fundamentals of Human Geography Fundamentals of Human Geography Fundamentals of Human Geography 74
World Trade Organisation
In1948, to liberalise the world from high
customs tariffs and various other types of
restrictions, General Agreement for Tariffs and
Trade (GATT) was formed by some countries.
In 1994, it was decided by the member
countries to set up a permanent institution for
looking after the promotion of free and fair trade
amongst nation and the GATT was transformed
into the World Trade Organisation from 1
st
January 1995.
WTO is the only international organisation
dealing with the global rules of trade between
nations. It sets the rules for the global trading
system and resolves disputes between its
member nations. WTO also covers trade in
services, such as telecommunication and
banking, and others issues such as intellectual
rights.
The WTO has however been criticised and
opposed by those who are worried about the
effects of free trade and economic globalisation.
It is argued that free trade does not make
ordinary people’s lives more prosperous. It is
actually widening the gulf between rich and
poor by making rich countries more rich. This
is because the influential nations in the WTO
focus on their own commercial interests.
Moreover, many developed countries have not
fully opened their markets to products from
developing countries. It is also argued that
issues of health, worker’s rights, child labour
and environment are ignored.
WTO Headquarters are located in Geneva, Switzerland.
164 countries were members of WTO as on December
2016.
India has been one of the founder member of WTO.
Regional Trade Blocs
Regional Trade Blocs have come up in order to
encourage trade between countries with
geographical proximity, similarity and
complementarities in trading items and to curb
restrictions on trade of the developing world.
Today, 120 regional trade blocs generate 52 per
cent of the world trade. These trading blocs
developed as a response to the failure of the global
organisations to speed up intra-regional trade.
Though, these regional blocs remove trade
tariffs within the member nations and
encourage free trade, in the future it could get
increasingly difficult for free trade to take place
between different trading blocs.
Concerns Related to International Trade
Undertaking international trade is mutually
beneficial to nations if it leads to regional
specialisation, higher level of production, better
standard of living, worldwide availability of
goods and services, equalisation of prices and
wages and diffusion of knowledge and culture.
International trade can prove to be
detrimental to nations of it leads to dependence
on other countries, uneven levels of
development, exploitation, and commercial
rivalry leading to wars. Global trade affects
many aspects of life; it can impact everything
from the environment to health and well-being
of the people around the world. As countries
compete to trade more, production and the use
of natural resources spiral up, resources get
used up faster than they can be replenished.
As a result, marine life is also depleting fast,
forests are being cut down and river basins sold
off to private drinking water companies. Multi-
national corporations trading in oil, gas mining,
pharmaceuticals and agri-business keep
expanding their operations at all costs creating
more pollution – their mode of work does not
follow the norms of sustainable development.
If organisations are geared only towards profit
making, and environmental and health
concerns are not addressed, then it could lead
to serious implications in the future.
Think of some reasons why dumping is becoming a
serious concern among trading nations?
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