Basis of International Trade

The basis of international trade is the exchange of goods due to demand and supply imbalance existing in various parts of the world, uneven distribution and exploitation of natural resources, varying production and consumption of goods, advanced technology enabling large-scale production based on international division of labor, and trading activities facilitated by services like shipping, banking, and insurance.

The factors governing trade mentioned in the text are capital/labor intensity, maritime location, climate/soil/vegetation, weather conditions, cultural and technological progress, political conditions, and comparative cost variation in the physical resources of the countries.

The uneven distribution of natural resources, which are again unevenly exploited, is the main reason for the growth of international trade as it leads to varying production and consumption of goods in different places, creating demand and supply imbalances that drive international trade.

Advanced technology makes it possible to secure large-scale production based on international division of labor and to exchange goods in world trade at competitive prices, thus contributing to international trade.

Shipping, banking, and insurance play a vital role in facilitating trading activities by enabling the exchange or trade of goods, providing financial and logistical support, and managing the associated risks.