Introduction
International trade is exchange of capital, goods, and services across international borders or territories. It refers to exports of goods and services by a firm to a foreign-based buyer (importer). In most countries, it represents a significant share of gross domestic product (GDP). While international trade has been present throughout much of history its economic, social, and political importance has been on the rise in recent centuries. Industrialization, advanced transportation, globalization, multinational corporations, and outsourcing are all having a major impact on the international trade system. Increasing international trade is crucial to the continuance of globalization. International trade is a major source of economic revenue for any nation that is considered a world power. Without international trade, nations would be limited to the goods and services produced within their own borders. International trade is in principle not different from domestic trade as the motivation and the behavior of parties involved in a trade do not change fundamentally regardless of whether trade is across a border or not. The main difference is that international trade is typically more costly than domestic trade. The reason is that a border typically imposes additional costs such as tariffs, time costs due to border delays and costs associated with country differences such as language, the legal system or culture. Another difference between domestic and international trade is that factors of production such as capital and labor are typically more mobile within a country than across countries. Thus international trade is mostly restricted to trade in goods and services, and only to a lesser extent to trade in capital, labor or other factors of production. Then trade in goods and services can serve as a substitute for trade in factors of production. Instead of importing a factor of production, a country can import goods that make intensive use of the factor of production and are thus embodying the respective factor. An example is the import of labor-intensive goods by the United States from China. Instead of importing Chinese labor the United States is importing goods from China that were produced with Chinese labor. International trade is also a branch of economics, which, together with international finance, forms the larger branch of international economics. Trading is very important process in the world. There are many organizations who are responsible for trading and who take part in trade process like look after if everything happen right and legally. One of the biggest organizations is WTO (World Trade organization).
International trade will depend on various factors, such as the distance between the countries. This factor describes the so-called Gravity model. This model implies that trade volume between the two countries is roughly proportional to their gross domestic product figure, at other equal conditions. Trading volume decreases with increasing distance between the two countries. Empirical studies show that increasing the distance between the countries of 1%, the trade volume between them is reduced by 0.7-1%. This ratio is often a significant change, other factors - the existence of economic cooperation between the countries concerned the political machinery similarities or differences, language barriers or intimacy.
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