Trade Types
Trade may be classified, geographically, as follows.
Internal Trade. The trade that occurs with the limits of a country is
called the internal trade. In this trade, the retail and wholesale traders buy the commodities from the
producers and sell to the consumers. Internal trade may be further divided as local trade and rural trade.
Local Trade. It
is a trade that occurs either on a daily basis or on some week days, within a
place. For example, these include the daily markets of the towns and cities and the weekly markets of the
rural areas. In these markets, the producers themselves sell their products to
consumers, more often than not. Perishable commodities such as the flowers,
fruits, vegetables and such commodities as those of the daily essentials are
traded here.
Rural Trade. All
commodities required by the parts of a country are not normally produced in
all parts of that country. Also, there
is a specific rural market for most of these commodities. Hence, trading is
generally seen between different parts of that country. For example, the coffee
that is grown in south India is sold in all parts of the country. Similarly,
the wheat that is grown mostly in north India is sold in all parts of the
country.
International Trade. It is a trade between the countries of the world. No country can
exist in isolation. They have to import those commodities they themselves do not produce, but require
nevertheless. Generally, agricultural and mineral products are exported from
the developing to the developed countries. In return, scientific instruments,
machineries and electronic equipments are imported by the developing from the
developed. In international trade, there are two major types.
Bilateral Trade. In this trade, a country gives a commodity it has in surplus to another in return for an
equally valuable commodity it requires and directly from that country.
Multilateral Trade. In this trade, a country exports commodities it produces to another and gets what it requires from a third using
the money it receives from the importer of its commodities.
As each country has its own currency, it posed a problem in the
multilateral trade as to which currency to be used in transactions. In the
beginning, the trade was conducted either with the American dollar or with the
British sterling pounds. Later, however, the currencies of the developed countries
such as Japan (Yen), Germany (Deutsch Marks)
and France
(Francs) were accepted. It was because there were not much of differences
between the value of these currencies. International Monetary Fund (IMF) has
been established under the auspices of the United Nations which permits the
Special Drawing Rights (SDR) as the international currency. Every member
country has its own SDRs depending on its share in the IMF. Each and every
country could import commodities from other countries using these SDRs as the
currency. The IMF thus provides loans for the member countries for the conduct
of international trade.
We could understand a country's level of economic development from the
commodities it exports and the commodities it imports. For example, as we have
seen, the developing countries largely export resources and agricultural
products and import high cost machines and consumer products. On the other
hand, the developed countries import more of the raw materials and agricultural
products, convert them into machines and consumer products and then export them
to the developing countries. Every country, in its efforts to achieve a
favourable trade balance, tries harder with actions to decrease the imports and
increase the exports. To discourage imports, it imposes customs duty. And to
increase exports, it provides subsidies. As a result, international trade is
affected. To avoid this difficulty, therefore, many countries have created
trade blocs.
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