Perspective on International Trade – Meaning and Important Concepts

International trades between countries and across continents have existed for centuries including previous civilizations. Traditionally international trade consisted of traded goods like textile, food items, spices, precious metals, precious stones, and objects of art and various items across the borders. Everybody has heard of the silk route as well as amber road and other famous routes that existed and the ports and settlements that flourished due to the trade, which was carried on through land route as well as sea routes.

We have come a long way since the earlier times and International trade today has taken on new dimension. It was a fact earlier that impact of trade between two countries was not limited to economics alone, but fuelled political, social ambitions too.

Today with the advancement of technology and impact of globalization has made it necessary for all countries to engage necessarily in international trade for their survival.

Various factors including but not limited to industrialization, development of transportation, globalization, technology that enables trade and communication has contributed to change in the format of business organizations as well as trade practices.

Companies and Organizations today are no longer entities with a local identity. Multi national organizations have emerged through the previous century with footprints all over the globe. They have in fact shrunk the earth and changed the way businesses are conducted. Companies no longer limit themselves to local markets. They no longer depend upon local resources. These companies setup manufacturing wherever it is conducive in terms of cheaper resource availability as well as support from local government and in terms of markets, geographical boundaries do not bother them. They are present everywhere.

Technology in terms of communication as well as software technology has changed the way business organizations manage activities be it manufacturing, procurement, finance or sales. Today software applications drive the processes and work at the speed of thought.

In present scenario, no country can afford to remain isolated from and not participate in globalization. While countries do open their economies to global competition, they need to tread very carefully not to upset their domestic economy and protected industries. This balancing act is often managed through individual countries trade and tariff policy, which forms a part of each countries foreign trade policy that governs its approach to international trade and commerce.

Post Second World War, World Trade Organization has been playing major role in facilitating and attempting to streamline the global trade and tariff structures with an aim to move towards free trade. However in reality, free trade may just be a dream as long as there is no parity between developed and developing economies.

Today most of the countries are party to several bi-lateral as well as multi lateral tariff and trade agreements like GATT — General Agreement on Tariffs and Trade though which they regulate imports and exports to and from specific countries.

In the last few decades we have seen the emergence of services export and imports and it is continually growing. Developing countries are harnessing their intellectual capital to provide software services to the developed countries.

Today’s international trade has many more new dimensions like intellectual property, a variety of services, trade related investments, Bilateral and Multilateral Trade Agreements, Establishing terms for trade in services, investments as well as creating climate for dispute settlement.

Managing International trade has multi dimensional aspects, which need to be considered, by each country. Any political, economic or other events anywhere in on the earth have an impact on each countries international trade. We have seen the impact of recession in one country affecting across the globe. We have also seen impact of financial markets crash in one country having ripple effects all over the world.

Any Business Manager holding responsibility of a business function in an organization today would have to be equipped with the macro level understanding of the world trade, macroeconomics, macro finance and its impact. He needs to understand at the micro level export and import policies and procedures of various countries to be able to steer his business ahead in accordance with the existing environment. It is his ability to fore see the risks, assess the impact and manage the risk that is going to be detrimental to his organization’s success.