Meaning of Trade

Meaning of Trade

Trade is one of the powerful forces of economic integration. The term ‘trade’ means exchange of goods, wares or merchandise among people.

Trade is of two types. They are:

a) Internal Trade and

b) International Trade.

1. Internal Trade

It refers to the exchange of goods and services within the political and geographical boundaries of a nation. It is a trade within a country. This is also known as ‘domestic trade’ or ‘home trade’ or ‘intra-regional trade’.

2. International Trade

It refers to the trade or exchange of goods and services between two or more countries.

In other words, it is a trade among different countries or trade across political boundaries.

It is also called as ‘external trade’ or ‘foreign trade’ or ‘inter-regional trade’.

3.  Differences between ‘Internal Trade’ and ‘International Trade’

Internal Trade

1. Trade takes place between different individuals and firms within the same nation.  

2. Labour and capital move freely from one region to another.

3. There will be free flow of goods and services since there are no restrictions.

4. There is only one common currency.

5. The physical and geographical conditions of a country are more or less similar.

6. Trade and financial regulations are more or less the same.

7. There is no difference in political affiliations, customs and habits of the people and government policies.

International Trade

1. Trade takes place between different individuals and firms in different countries.

2. Labour and capital do not move easily from one nation to another.

3. Goods and services do not easily move from one country to another since there are a number of restrictions like tariff and quota.

4. There are different currencies.

5. There are differences in physical and geographical conditions of the two countries.

6. Trade and financial regulations such as interest rate, trade laws differ between countries.

7. Differences are pronounced in political affiliations, habits and customs of the people and government policies.