<h5 id="history-of-international-trade">HISTORY OF INTERNATIONAL TRADE</h5> <ul> <li>In ancient times, trade was limited to local markets due to the risks associated with long-distance transportation.</li> <li>The Silk Route is an example of long-distance trade, connecting Rome to China, where high-value commodities like Chinese silk, Roman wool, and precious metals were transported.</li> <li>The European colonialism in the 15th century led to the emergence of a new form of trade, called slave trade, which was abolished in Denmark, Great Britain, and the United States by the end of the 1800s.</li> <li>The Industrial Revolution increased the demand for raw materials, and industrialized nations became each other’s primary customers in the later half of the 19th century.</li> <li>During the World Wars, countries imposed trade taxes and quantitative restrictions, but organizations like GATT (later WTO) helped reduce tariffs in the postwar period.</li> </ul> <p>======</p> <h5 id="why-does-international-trade-exist">Why Does International Trade Exist?</h5> <ul> <li>International trade is a result of specialization in production, leading to mutual benefits for trading partners.</li> <li>It is based on the principle of comparative advantage, where countries produce and export goods or services in which they have a relative advantage.</li> <li>Complementarity and transferability of goods and services also contribute to international trade.</li> <li>In modern times, international trade is crucial for the world’s economic organization and is connected to the foreign policy of nations.</li> <li>Developed transportation and communication systems enable countries to partake in and benefit from international trade.</li> </ul> <p>======</p> <h5 id="basis-of-international-trade">Basis of International Trade</h5> <ul> <li> <p>The world’s national resources are unevenly distributed due to differences in geology, relief, soil, and climate, leading to diversity in crops, animals, mineral resources, and tourism opportunities.</p> </li> <li> <p>Population factors such as cultural diversity and size impact the type and volume of goods traded. Distinctive art, craft, and handicrafts develop in certain cultures, and densely populated countries have large volumes of internal trade but little external trade.</p> </li> <li> <p>The stage of economic development of a country influences the nature of items traded. Agriculturally important countries exchange agro-products for manufactured goods, while industrialized nations export machinery and finished products.</p> </li> <li> <p>Foreign investment in developing countries can boost trade by developing capital-intensive industries, ensuring imports of food stuffs, minerals, and creating markets for finished products, increasing the volume of trade between nations.</p> </li> <li> <p>The expansion of transport, including rail, ocean, and air transport, has led to better means of refrigeration and preservation, enabling spatial expansion and increased trade of various goods between nations.</p> </li> </ul> <p>======</p> <h5 id="balance-of-trade">Balance of Trade</h5> <ul> <li>The balance of trade is a record of the value of a country’s imports and exports.</li> <li>If a country’s imports exceed its exports, it has a negative or unfavorable balance of trade.</li> <li>A positive or favorable balance of trade occurs when a country’s exports are greater than its imports.</li> <li>A negative balance of trade can lead to the exhaustion of a country’s financial reserves.</li> <li>Both balance of trade and balance of payments have significant impacts on a country’s economy.</li> </ul> <p>======</p> <h5 id="types-of-international-trade">Types of International Trade</h5> <ul> <li>International trade can be categorized into two types: Bilateral and Multilateral trade.</li> <li>Bilateral trade occurs between two countries who agree to trade specified commodities with each other.</li> <li>An example of bilateral trade would be Country A agreeing to trade raw materials with Country B in exchange for other specified items.</li> <li>Multilateral trade involves many trading countries and allows for trade between a number of different countries.</li> <li>This type of trade may also include the granting of the “Most Favoured Nation” (MFN) status to some trading partners.</li> </ul> <p>======</p> <h5 id="case-for-free-trade">Case for Free Trade</h5> <ul> <li>Free trade, or trade liberalization, involves opening economies for trading by reducing trade barriers like tariffs.</li> <li>This allows foreign goods and services to compete with domestic products and services, which can have adverse effects on developing countries’ economies due to unequal playing fields and unfavorable conditions.</li> <li>With advancements in transport and communication systems, goods and services can now travel faster and farther, increasing the reach of free trade.</li> <li>However, free trade should ensure that developing countries can also protect their markets from foreign products, and countries must be cautious about dumped goods that can harm domestic producers with cheaper prices.</li> <li>Dumping, the practice of selling commodities at different prices in two countries for reasons unrelated to costs, is becoming a serious concern among trading nations due to its potential negative impact on domestic producers and economies.</li> </ul> <p>======</p> <h5 id="world-trade-organisation">World Trade Organisation</h5> <ul> <li>GATT, formed in 1948, was transformed into the World Trade Organisation (WTO) in 1995 to promote free and fair trade amongst nations.</li> <li>WTO, headquartered in Geneva, Switzerland, sets rules for the global trading system, resolves disputes, and covers trade in services, intellectual rights, etc.</li> <li>WTO has 164 member countries (as of December 2016) and includes India as one of its founding members.</li> <li>Critics argue that free trade in WTO widens the gap between rich and poor, ignoring issues of health, worker’s rights, child labour, and environment.</li> <li>Critics also point out that developed countries have not fully opened their markets to products from developing countries, focusing on their own commercial interests.</li> </ul> <p>======</p> <h5 id="regional-trade-blocs">Regional Trade Blocs</h5> <ul> <li>Regional Trade Blocs aim to promote trade among countries with geographical proximity, similarity, and complementarities in trading items.</li> <li>They have emerged to address the limitations of global organizations in facilitating intra-regional trade and to reduce trade restrictions, particularly for developing nations.</li> <li>Currently, there are around 120 active Regional Trade Blocs, responsible for generating 52% of the world trade.</li> <li>These blocs eliminate trade tariffs among member nations and support free trade, but future challenges may arise in implementing free trade between different trading blocs.</li> <li>The formation of Regional Trade Blocs has been a response to the inadequacies of global organizations in fostering regional trade.</li> </ul> <p>======</p> <h5 id="concerns-related-to-international-trade">Concerns Related to International Trade</h5> <ul> <li>International trade can lead to regional specialization, higher production levels, improved standard of living, global availability of goods and services, equalization of prices and wages, and diffusion of knowledge and culture.</li> <li>However, it can also result in dependence on other countries, uneven levels of development, exploitation, and commercial rivalry that may lead to wars.</li> <li>Trade significantly impacts various aspects of life, such as the environment and health and well-being of people worldwide.</li> <li>Increased production and use of natural resources due to global trade can deplete resources faster than they can be replenished, affecting marine life, forests, and river basins.</li> <li>Multinational corporations, particularly in industries like oil, gas mining, pharmaceuticals, and agri-business, contribute to pollution and disregard sustainable development norms, which can lead to severe consequences in the future if environmental and health concerns are not addressed.</li> </ul> <p>======</p> <h5 id="gateways-of-international-trade">GATEWAYS OF INTERNATIONAL TRADE</h5> <ul> <li>International trade is facilitated through various gateways, including seaports, airports, land borders, and canal systems.</li> <li>Seaports are the most common gateways, handling the majority of international trade by volume. They are classified into three types: cargo-dedicated, passenger-dedicated, and specialized ports.</li> <li>Airports are essential for time-sensitive and high-value goods, with the top 50 airports handling around 40% of global air freight.</li> <li>Land borders play a crucial role in trade between neighboring countries, with the efficiency of border crossings significantly impacting trade volumes.</li> <li>Canal systems, such as the Suez and Panama Canals, are vital for global trade, providing cost-effective and time-efficient routes for shipping goods between continents.</li> <li>The growth of international trade has led to increased investment in gateway infrastructure, with public-private partnerships playing a significant role in financing these developments.</li> </ul> <p>======</p> <h5 id="ports">Ports</h5> <ul> <li>Ports are crucial gateways for international trade, serving as points of entry and exit for cargo and travelers.</li> <li>They offer facilities such as docking, loading, unloading, storage, and maintenance of navigable channels.</li> <li>The importance of a port is determined by the volume of cargo handled and the number of ships it can accommodate.</li> <li>The quantity of cargo handled by a port is indicative of the development level of its hinterland.</li> <li>Fig. 8.3 shows San Francisco, the largest land-locked harbor in the world.</li> </ul> <p>======</p> <h5 id="types-of-port">Types of Port</h5> <ul> <li>Ports can be classified according to the type of cargo they handle: Industrial Ports handle bulk cargo like grain, sugar, ore, oil, chemicals, and similar materials. Commercial Ports handle general cargo, packaged products, manufactured goods, and passenger traffic. Comprehensive Ports handle bulk and general cargo in large volumes.</li> <li>Ports can also be classified based on their location: Inland Ports are located away from the sea coast and are linked to the sea through a river or a canal. Out Ports are deep water ports built away from the actual ports to serve the parent ports by receiving large ships.</li> <li>There are also ports classified based on specialized functions: Oil Ports deal in the processing and shipping of oil, some are tanker ports and some are refinery ports. Ports of Call originally developed as calling points on main sea routes for refueling, watering, and taking food items. Packet Stations, or ferry ports, are exclusively concerned with the transportation of passengers and mail across water bodies over short distances.</li> <li>Entrepot Ports are collection centers where goods are brought from different countries for export. Singapore is an Entrepot for Asia, Rotterdam for Europe, and Copenhagen for the Baltic region.</li> <li>Naval Ports have strategic importance, serving warships and having repair workshops for them. Kochi and Karwar are examples of such ports in India.</li> </ul> <p>======</p>