Question

Explain different aspects of international trade.

Answer 1

International trade has three important aspects. These are volume, sectoral composition, and direction of trade.

• The volume of Trade: The actual tonnage of goods traded makes up the volume. However, services traded cannot be measured in tonnage. Therefore, the total value of goods and services traded is considered to be the volume of trade.
• Composition of Trade: It refers to the items of which trade consists. The nature of goods and services imported and exported by countries has undergone changes during the last century. Trade of primary products was dominant at the beginning of the last century. Later manufactured goods gained prominence. The service sector which includes travel, transportation, and other commercial services have been showing an upward trend
• The direction of Trade: It refers to the countries with which a country has trade relations. Like India’s majority of trade was with the UK during colonial rule. The developing countries of the present used to export valuable goods and artifacts, etc., which were exported to European countries. During the 19th century, there was a reversal in the direction of trade. European countries started exporting manufactured goods for the exchange for foodstuffs and raw materials from their colonies. Europe and U.S.A. emerged as major trade partners in the world and were leaders in the trade of manufactured goods. The world trade pattern underwent a sea change during the second half of the twentieth century. Europe lost its colonies while India, China, and other developing countries started competing with developed countries.