International trade is the study of exchange of goods and services within the international periphery. International trade can be exemplified in terms of GDP (Gross Domestic Product) of a country. Some of the major components that influence international trade include industrialization, good transportation system, involvement of multinational companies and outsourcing.
International trade is also a branch of economics. International trade, along with international finance, constitutes a larger branch of global economics.
Need of running international trade
Countries all over the world need to participate in international trade to make up various deficiencies and obtain resources necessary to produce goods and services desired by the citizens of the country. A country may export raw materials in exchange of processed processed foods and finished products of another country. The three basic components of trade are capital, labor and land.
Leading industrial based countries like Japan and Germany produce a large quantity of capital intensive products like heavy construction equipment, industrial machinery and cars. This is because of shortage of available land, Japan is more concerned with capital - intensive production, instead of land-intensive production.
The countries that have relatively low labor costs, stress on producing labor-intensive commodities like clothing, shoes and other consumable goods. Indonesia and China are the examples of labor-intensive producing countries.
International economics
International economics comprises three primary sub-disciplines like international trade, monetary theory and international finance.- International trade is the branch of study of the exchange of goods and services over international boundaries. Monetary theory is the study of monetary flows across countries of the world involved in international trade and international finance is the study of global financial market.
- Monetary theory can be treated as one of the important branches of macroeconomics that primarily concerned with monetary systems, employment and the level of prices within a macro-economy.
- International finance primarily concerned with exchange rates and foreign investment that influence international trade.
