Countries have been active participants in International trade since time immemorial. International trade can be referred to, as the exchange of services as well as goods across international soil and international borders. The importance of international trade cannot be ignored. It has contributed immensely to the all sided development of a nation. It has brought about political, social and economic upliftment of countries. International trade, in a majority of the countries have contributed significantly to the gross domestic product or the GDP. It has served as a platform for "globalization".
Theories of International trade:
Many models have been propounded to evaluate and predict different international trade patterns and to study the effects of tariff. The different theories or models are given below:
- Gravity Model
- Heskscher-Ohlin Model
- Ricardian Model
- Specific Factors
International trade regulation:
In the olden days, people believed in Mercantilism. As a result of this, tariffs used to be very high and several restrictions were imposed on international trade. Bilateral treaties usually regulated international trade between two countries. With the introduction of multilateral treaties (GATT), the World Trade Organization, has attempted to create a uniform trade structure worldwide, through agreements. This attempt was however, greeted with a lot of dissatisfaction and revolt. Many countries were of the opinion that, these agreements did not see the interest of all the nations equally.
Risks involved in international trade:
There are several risks involved in international trade. The risks can be categorized in two groups:
- Political risks
- Economic risks
One may browse through the following links to have a detailed idea.