Trade

From ArticleWorld

Trade has been defined as the exchange of goods or raw materials, either for money or for other goods or raw materials, by individuals, communities, companies, or countries. It is the commercial exchange of goods and services between buyers and sellers. People have traded with each other for centuries in order to overcome local scarcity of goods. Trade is also carried on for cultural and political reasons as well as economic development. Trade between one seller and one buyer is termed as bilateral trade while trade which involves a large number of buyers and sellers in the market is known as multilateral trade.

Why trade

No country in the world can manufacture all of the goods and services that their populations need or desire. Many goods require a variety of raw materials that any one country will not be able to produce. Countries also trade because it is generally more reasonably profitable for them to do so; rather than produce it themselves. Thus, for eons, people have traded locally, regionally, nationally and internationally to triumph over the problems of local product/resource scarcity.

Product or service scarcity is not, however, the only reason that urges countries to engage in international trade. Trade is also seen as a foreign policy tool and countries encourage trade in order to encourage economic links and promote international security. Trade is also used to engender economic or political control. There may also be some psychological, cultural/traditional and even social reasons for practicing trade. In some societies, trade is a way of preserving and strengthening social bonds.

Controlling trade

Trade has many times been controlled by states through force. This is done with a desire to protect domestic industries or keep up favorable trade conditions for a nation or a group of nations. A country may also be trying to protect a new born industry that is trying to find its feet in the international markets or inversely trying to support old and ailing industries and hence control trade.

Trade may be controlled through taxes (both export and import), tariffs, quotas and regulations.