International trade can be defined as the exchange, buying, and selling of goods and services between two or more countries. It is the exchange of goods and services that take place across international boundaries e.g. The exchange of goods and services between Nigeria, Ghana, Togo, Britain, and the USA. It is known as international trade, external or foreign trade.
Types of International Trade
- Bi-lateral international trade
- Multi-lateral international trade
- Bi-lateral international trade: Bi-lateral international trade is a trade that takes place between two countries, for example, Nigeria and Ghana.
- Multi-lateral international trade: This is a trade that takes place between more than two countries, for example, trade between Nigeria, Togo, France, and the USA. This is the commonest form of trade that exists between countries of the world.
Reasons for International Trade
Countries of the world engage in international trade because of the following reasons.
1. There is an inequitable distribution of natural resources example Nigeria is blessed with resources such as petroleum, coal, and tin while Ghana has gold which is redistributed through international trade.
2. Differences in climate conditions, geographical factors: Many agricultural produce can only be grown under a particular climate condition.
3. Differences in skill and technology: This leads to differences in products produced and the need for their exchange.
4. Differences in the level of industrialization: This brings about the disparity in the level of production which necessitates exchange.
5. There are differences in the quantity and quality of labour force.
6. Differences in stock of capital: Most developed countries can boast of adequate capital to produce both capital and consumer goods and sell them to the less developed countries.
Some barriers to international trade are Language, Distance, Tariffs, Distance, Ideological differences, and Currency.