FACULTY OF RURAL MANAGEMENT STDIES

INSTITUTE OF RURAL MANAGEMENT

ASSIGNMENT: - 1
SUBJECT Economic environment of business
Topic International trade

Submitted To -

Submitted By-

Mr.Ullas p. Ramakrishnan

Ayushi Ojha

Professor

PGDM- BM

FMS-IRM

Sec A

International trade
The export and import of goods and services among different countries is called international trade.

The world economy is based on this kind of trade and this majority decides the pricing/ supply and
demand of goods in any country. The international trade is influenced by political and economic structure
of different countries and much important trade is influenced by political and economic structure of
different countries and many important global event have their root cause as the international trade
norms. International trade helps in balancing surplus and scarcity.
FOR EXAMPLE- There is huge oil reserve in Middle East so they export it to other countries but due to
shortage of food supplies they have to import those type of goods from other countries.
Trading take place for all kinds old products, even for perishable product too. International trade gives
boost to developing economics with for ex inflow and generation of employment and infrastructure
development as well. This also allows a country to expand its market and the related benefits with respect
to goods and services and give customer a variety of choice also if a country cannot efficiently produce an
item, it can obtain the item by trading with another country that can. This is known as specialization in
international trade. This is turn leads to development of native markets and they become more
competitive to cope with foreign players. This has few problem attached to it to. Critics say that it is the
route by which rich countries exploit the developing ones by making them work at low wages, dumping
surplus and defect goods in these countries.

Free trade vs. protectionism

International trade has two contrasting views regarding the level of control placed on trade: Free trade
and protectionism
Free trade is the simpler of the two theories: a laissez faire approach, with no restriction on trade. The
main idea is that supply and demand factors, operating on a global scale, will ensure that production
happens efficiently. Therefore, nothing needs to be done to protect or promote trade and growth, because
market forces will do so automatically.

Benefits of trading globally:International trade not only result in increased efficiency but also allows countries to participate in a global
economy, encouraging the opportunity of foreign direct investment (FDI) which is the amount of money
that individual invest into foreign companies and other assets. Therefore economies can grow more easily
and become competitive economic participants.
For the receiving government, FDI is a means by which foreign currency and expertise can enter the
country. These raise employment levels and gross domestic product. For the investor, FDI offers company
expansion and growth, which means higher revenues.

Reason for International trade:

The diversity in condition: - Trade may take place because of the diversity in condition of

production among countries.

Return of scale :- International trade may help in increasing the return of scale
Taste of goods: - Countries might engage in trade if their tastes for goods were different.
Higher income & economic growth
Sharing technology & information
Efficiency and cost effectiveness
Improved relationship

Difference between domestic trade and international trade

1. Mobility in factor of production
Domestic Trade: - Free to move around factors of production like land, labour, capital and
entrepreneurship from one state to another within the same country
International trade: - Quite restricted
2. Movement of goods
Domestic Trade: - Easier to move goods without much restriction only pay sales tax etc.
International trade: - Restricted due to complicated custom procedure and trade barrier like tariff, quotas
etc
3. Usage of different countries :Domestic Trade: - Same type of currency used
International Trade: - Different countries used different currencies
4. Broader markets :-

Domestic Trade: - limited market due to limits in population etc

International Trade: - Broader markets
5. Language and cultural barriers :Domestic Trade: - Speak same language and practice same culture
International trade: - Communication challenges due to language and cultural barrier

Major current trends in foreign trade

Current trends are towards the increasing foreign trade and interdependence of firm, market and
countries. Intense competition among countries, industries and firms on a global level is a recent
development owed to the confluence of several major trends is:-

Forced dynamism:International trade is forced to come in trend that shape the global political, cultural and economic
environment. International trade is a complex topic, because the environment it operates in is constantly
changing. First, businesses are constantly pushing the frontiers of economic growth, technology, culture,
and politics which also change the surrounding global society and global economic context. Secondly,
factors external to international trade are constantly forcing international trade to change how they
operate.
Liberalization of Cross-border Movements:
Governments today impose fewer restrictions on cross-border movements than they did a decade or two
ago, allowing companies to better take advantage of international opportunities. Governments have
decreased restrictions because they believe that:i) It will give consumers better access to a greater variety of goods and services at lower prices,
ii) Producers will become more efficient by competing against foreign companies, and
iii) If they reduce their own restrictions, other countries will do the same.
Transfer of Technology:
Technology transfer is the process by which commercial technology is disseminated. This will take the
form of a technology transfer transaction, which may or may not be a legally binding contract, but which
will involve the communication, by the transferor, of the relevant knowledge to the recipient. It also
includes non-commercial technology transfers, such as those found in international cooperation
agreements between developed and developing states. Such agreements may relate to infrastructure or
agricultural development, or to international; cooperation in the fields of research, education, employment
or transport.

Growth in Emerging Markets:

The growth of emerging markets (e.g., India, China, Brazil, and other parts of Asia and South America
especially) has impacted international trade in every way. The emerging markets have simultaneously
increased the potential size and worth of current major international trade while also facilitating the
emergence of a whole new generation of innovative companies.

From current scenario:China emerges as Indias top trading partner

India's eastern neighbor China has emerged as its biggest trading partner in the
current fiscal replacing the UAE and pushing it to the third spot, according to a
study conducted by PHD Chamber of Commerce.
India-China trade has reached $49.5 billion with 8.7% share in India's total trade,
while the US comes second at $46 billion with 8.1% share and the UAE third at
$45.4 billion with 8% share during the first nine months of the current fiscal, the
study revealed.

The UAE was India's biggest trading partner in the 2012-13 fiscal.
India's trade (exports and imports) with China was only of $7 billion in 2004 which
rose to $38 billion in 2008 and to $65 billion in 2013.

Product Export from India:-

Product Import from India:-

Conclusion:The importing and exporting of goods is big business in today's global economy. When goods are
produced in one country and sold in another, international trade occurs. It is so common to find items
produced worldwide that people rarely even think about it.
In general, international trade allows countries to focus on the industries in which they can be most
productive and efficient. In this way, trade often raises the standard of living of both producers and
consumers. International trade also has a dark side.
The benefits and pitfalls of trade affect the economy at its core. Everything from output to standard of
living to interest rates remains under the partial control of international trade. By understanding
international trade, we will uncover one of the most important real life applications of macroeconomics.