International Trade PDF

You are already familiar with the term “trade” Unit-III as a tertiary activity which you have studied in Chapter-8 Chapter 7 of this book. You know that trade means the vol...

You are already familiar with the term “trade” Unit-III as a tertiary activity which you have studied in Chapter-8 Chapter 7 of this book. You know that trade means the voluntary exchange of goods and services. Two parties are required to trade. One person sells and the other purchases. In certain places, people barter their goods. For both the parties trade is mutually beneficial. Trade may be conducted at two levels: international and national. International trade is the exchange of goods and services among countries across national boundaries. Countries need to trade to obtain commodities, they cannot produce themselves or they can purchase elsewhere at a lower price. International Trade The initial form of trade in primitive societies was the barter system, where direct exchange of goods took place. In this system if you were a potter and were in need of a plumber, you would have to look for a plumber who would be in need of pots and you could exchange your pots for his plumbing service. Fig. 8.1: Two women practising barter system in Jon Beel Mela Every January after the harvest season Jon Beel Mela takes place in Jagiroad, 35 km away from Guwahati and it is possibly the only fair In India, where barter system is still alive. A big market is organised during this fair and people from various tribes and communi- ties exchange their products. The difficulties of barter system were overcome by the introduction of money. In the olden times, before paper and coin currency 70 Fundamentals of Human Geography Reprint 2024-25 came into being, rare objects with very high intrinsic value served as money, like, flintstones, obsidian, cowrie shells, tiger’s paws, whale’s teeth, dogs teeth, skins, furs, cattle, rice, peppercorns, salt, small tools, copper, silver and gold. The word salary comes from the Latin word Salarium which means payment by salt. As in those times producing salt from sea water was unknown and could only be made from rock salt which was rare and expensive. That is why it became a mode of payment. HISTOR HIST Y OF INTERN ORY OR ATION INTERNA AL TRADE TIONAL In ancient times, transporting goods over long distances was risky, hence trade was restricted Figure 8.2 : Advertisement for Slave Auction, 1829 to local markets. People then spent most of their resources on basic necessities – food and This American slave auction advertised slaves for sale clothes. Only the rich people bought jewellery, or temporary hire by their owners. Buyers often paid as costly dresses and this resulted in trade of much as $2,000 for a skilled, healthy slave. Such auc- luxury items. tions often separated family members from one another, many of whom never saw their loved ones again. The Silk Route is an early example of long distance trade connecting Rome to China – After the Industrial Revolution the demand along the 6,000 km route. The traders for raw materials like grains, meat, wool also transported Chinese silk, Roman wool and expanded, but their monetary value declined precious metals and many other high value in relation to the manufactured goods. commodities from intermediate points in India, The industrialised nations imported Persia and Central Asia. primary products as raw materials and After the disintegration of the Roman exported the value added finished products Empire, European commerce grew during back to the non-industrialised nations. twelfth and thirteenth century with the In the later half of the nineteenth century, development of ocean going warships trade regions producing primary goods were no more between Europe and Asia grew and the important, and industrial nations became each Americas were discovered. other’s principle customers. Fifteenth century onwards, the European During the World Wars I and II, countries colonialism began and along with trade of exotic imposed trade taxes and quantitative commodities, a new form of trade emerged restrictions for the first time. During the post- which was called slave trade. The Portuguese, war period, organisations like General Agreement for Tariffs and Trade (which later Dutch, Spaniards, and British captured African became the World Trade Organisation), helped natives and forcefully transported them to the in reducing tariff. newly discovered Americas for their labour in the plantations. Slave trade was a lucrative business for more than two hundred years till Why Does International Trade Exist? it was abolished in Denmark in 1792, Great International trade is the result of specialisation Britain in 1807 and United States in 1808. in production. It benefits the world economy if International Trade 71 Reprint 2024-25 different countries practise specialisation and cultures which are valued the world division of labour in the production of over, e.g. China produces the finest commodities or provision of services. Each kind porcelains and brocades. Carpets of of specialisation can give rise to trade. Thus, Iran are famous while North African international trade is based on the principle of leather work and Indonesian batik comparative advantage, complimentarity and cloth are prized handicrafts. transferability of goods and services and in (b) Size of population: Densely principle, should be mutually beneficial to the populated countries have large trading partners. volume of internal trade but little In modern times, trade is the basis of the external trade because most of the world’s economic organisation and is related agricultural and industrial to the foreign policy of nations. With well- production is consumed in the local developed transportation and communication markets. Standard of living of the systems, no country is willing to forego the population determines the demand benefits derived from participation in for better quality imported products international trade. because with low standard of living only a few people can afford to buy Basis of International Trade costly imported goods. (iii) Stage of economic development: At (i) Difference in national resources: The different stages of economic development world’s national resources are unevenly of countries, the nature of items traded distributed because of differences in their undergo changes. In agriculturally physical make up i.e. geology, relief soil important countries, agro products are and climate. exchanged for manufactured goods (a) Geological structure: It determines whereas industrialised nations export the mineral resource base and machinery and finished products and topographical differences ensure import food grains and other raw diversity of crops and animals materials. raised. Lowlands have greater (iv) Extent of foreign investment: Foreign agricultural potential. Mountains investment can boost trade in developing attract tourists and promote countries which lack in capital required tourism. for the development of mining, oil drilling, (b) Mineral resources: They are heavy engineering, lumbering and unevenly distributed the world over. plantation agriculture. By developing The availability of mineral resources such capital intensive industries in provides the basis for industrial developing countries, the industrial development. nations ensure import of food stuffs, (c) Climate: It influences the type of flora and fauna that can survive in a given minerals and create markets for their region. It also ensures diversity in finished products. This entire cycle steps the range of various products, e.g. up the volume of trade between nations. wool production can take place in (v) T ransport: In olden times, lack of cold regions, bananas, rubber and adequate and efficient means of transport cocoa can grow in tropical regions. restricted trade to local areas. Only high (ii) Population factors: The size, distribution value items, e.g. gems, silk and spices and diversity of people between countries were traded over long distances. With affect the type and volume of goods expansions of rail, ocean and air traded. transport, better means of refrigeration (a) Cultural factors: Distinctive forms of and preservation, trade has experienced art and craft develop in certain spatial expansion. 72 Fundamentals of Human Geography Reprint 2024-25 Balance of Trade Globalisation along with free trade can Balance of trade records the volume of goods adversely affect the economies of developing and services imported as well as exported by a countries by not giving equal playing field by country to other countries. If the value of imposing conditions which are unfavourable. imports is more than the value of a country’s With the development of transport and exports, the country has negative or communication systems goods and services can unfavourable balance of trade. If the value of travel faster and farther than ever before. But exports is more than the value of imports, then free trade should not only let rich countries the country has a positive or favourable balance enter the markets, but allow the developed of trade. countries to keep their own markets protected Balance of trade and balance of payments from foreign products. have serious implications for a country’s Countries also need to be cautious about economy. A negative balance would mean that dumped goods; as along with free trade the country spends more on buying goods than dumped goods of cheaper prices can harm the it can earn by selling its goods. This would domestic producers. ultimately lead to exhaustion of its financial reserves. Dumping Types of International Trade The practice of selling a commodity in two countries at a price that differs for reasons International trade may be categorised into two not related to costs is called dumping. types: (a) Bilateral trade: Bilateral trade is done by two countries with each other. They enter into agreement to trade specified commodities amongst them. For example, country A may agree to trade some raw material with agreement to purchase some other specified item to country B or vice versa. (b) Multi-lateral trade: As the term suggests multi-lateral trade is conducted with many trading countries. The same country can trade with a number of other countries. The country may also grant the status of the “Most Favoured Nation” (MFN) on some of the trading partners. Case for Free Trade The act of opening up economies for trading is known as free trade or trade liberalisation. This is done by bringing down trade barriers like tariffs. Trade liberalisation allows goods and services from everywhere to compete with domestic products and services. International Trade 73 Reprint 2024-25  Regional Trade Blocs Regional Trade Blocs have come up in order to Think of some reasons why dumping is becoming a encourage trade between countries with serious concern among trading nations? geographical proximity, similarity and complementarities in trading items and to curb restrictions on trade of the developing world. World Trade Organisation Today, 120 regional trade blocs generate 52 per In1948, to liberalise the world from high cent of the world trade. These trading blocs customs tariffs and various other types of developed as a response to the failure of the global restrictions, General Agreement for Tariffs and organisations to speed up intra-regional trade. Trade (GATT) was formed by some countries. Though, these regional blocs remove trade In 1994, it was decided by the member tariffs within the member nations and countries to set up a permanent institution for encourage free trade, in the future it could get looking after the promotion of free and fair trade increasingly difficult for free trade to take place amongst nation and the GATT was transformed between different trading blocs. into the World Trade Organisation from 1st January 1995. Concerns Related to International Trade WTO is the only international organisation dealing with the global rules of trade between Undertaking international trade is mutually nations. It sets the rules for the global trading beneficial to nations if it leads to regional system and resolves disputes between its specialisation, higher level of production, better member nations. WTO also covers trade in standard of living, worldwide availability of services, such as telecommunication and goods and services, equalisation of prices and banking, and others issues such as intellectual wages and diffusion of knowledge and culture. rights. International trade can prove to be The WTO has however been criticised and detrimental to nations of it leads to dependence opposed by those who are worried about the on other countries, uneven levels of effects of free trade and economic globalisation. development, exploitation, and commercial It is argued that free trade does not make rivalry leading to wars. Global trade affects ordinary people’s lives more prosperous. It is many aspects of life; it can impact everything actually widening the gulf between rich and from the environment to health and well-being poor by making rich countries more rich. This of the people around the world. As countries is because the influential nations in the WTO compete to trade more, production and the use focus on their own commercial interests. of natural resources spiral up, resources get Moreover, many developed countries have not used up faster than they can be replenished. fully opened their markets to products from As a result, marine life is also depleting fast, developing countries. It is also argued that forests are being cut down and river basins sold issues of health, worker’s rights, child labour off to private drinking water companies. Multi- and environment are ignored. national corporations trading in oil, gas mining, pharmaceuticals and agri-business keep expanding their operations at all costs creating WTO Headquarters are located in Geneva, Switzerland. more pollution – their mode of work does not follow the norms of sustainable development. 164 countries were members of WTO as on December If organisations are geared only towards profit 2016. making, and environmental and health concerns are not addressed, then it could lead India has been one of the founder member of WTO. to serious implications in the future. 74 Fundamentals of Human Geography Reprint 2024-25 GATEWAYS OF INTERNATIONAL TRADE Ports The chief gateways of the world of international trade are the harbours and ports. Cargoes and travellers pass from one part of the world to another through these ports. The ports provide facilities of docking, loading, unloading and the storage facilities for cargo. In order to provide these facilities, the port authorities make arrangements for maintaining navigable channels, arranging tugs and barges, and providing labour and managerial services. The importance of a port is judged by the size of cargo and the number Fig. 8.4: Leningrad Commercial Port of ships handled. The quantity of cargo handled by a port is an indicator of the level of (iii) Comprehensive Ports: Such ports handle development of its hinterland. bulk and general cargo in large volumes. Most of the world’s great ports are classified as comprehensive ports. Types of port on the basis of location: (i) Inland Ports: These ports are located away from the sea coast. They are linked to the sea through a river or a canal. Such ports are accessible to flat bottom ships or barges. For example, Manchester is linked with a canal; Memphis is located on the river Mississippi; Rhine has several ports like Mannheim and Duisburg; and Kolkata is located on the river Hoogli, a branch of the river Ganga. (ii) Out Ports: These are deep water ports built away from the actual ports. These serve Fig. 8.3: San Francisco, the largest land-locked harbour in the world the parent ports by receiving those ships which are unable to approach them due to their large size. Classic combination, Types of Port for example, is Athens and its out port Piraeus in Greece. Generally, ports are classified according to the types of traffic which they handle. Types of port on the basis of specialised Types of port according to cargo handled: functions: (i) Industrial Ports: These ports specialise in (i) Oil Ports: These ports deal in the bulk cargo-like grain, sugar, ore, oil, processing and shipping of oil. Some of chemicals and similar materials. these are tanker ports and some are (ii) Commercial Ports: These ports handle refinery ports. Maracaibo in Venezuela, general cargo-packaged products and Esskhira in Tunisia, Tripoli in Lebanon are manufactured good. These ports also tanker ports. Abadan on the Gulf of Persia handle passenger traffic. is a refinery port. International Trade 75 Reprint 2024-25 (ii) Ports of Call: These are the ports which other across the water body, e.g. Dover in originally developed as calling points on England and Calais in France across the main sea routes where ships used to English Channel. anchor for refuelling, watering and taking (iv) Entrepot Ports: These are collection centres food items. Later on, they developed into where the goods are brought from different commercial ports. Aden, Honolulu and countries for export. Singapore is an Singapore are good examples. entrepot for Asia. Rotterdam for Europe, (iii) Packet Station: These are also known as and Copenhagen for the Baltic region. ferry ports. These packet stations are (v) Naval Ports: These are ports which have exclusively concerned with the only strategic importance. These ports transportation of passengers and mail serve warships and have repair workshops across water bodies covering short for them. Kochi and Karwar are examples distances. These stations occur in pairs of such ports in India. located in such a way that they face each EXERCISES 1. Choose the right answer from the four alternatives given below. (i) Most of the world’s great ports are classified as: (a) Naval Ports (c) Comprehensive Ports (b) Oil Ports (d) Industrial Ports (ii) Which one of the following continents has the maximum flow of global trade? (a) Asia (c) Europe (b) North America (d) Africa 2. Answer the following questions in about 30 words: (i) What is the basic function of the World Trade Organisation? (ii) Why is it detrimental for a nation to have negative balance of payments? (iii) What benefits do nations get by forming trading blocs? 3. Answer the following questions in not more than 150 words: (i) How are ports helpful for trade? Give a classification of ports on the basis of their location. (ii) How do nations gain from International Trade? 76 Fundamentals of Human Geography Reprint 2024-25