Development of a country depends on the ability to satisfy its own needs. But due primarily to the geographical conditions existing in the country, it may not be possible for it to produce all its needs. Hence, it produces some goods in good measure and others in a large measure. The commodities produced in excess of demand is considered as the 'surplus' product while those produced in quantitites less than demanded is considered as the 'deficit' product. The process in which the surpluses are bartered for the deficits is called 'trade'.
In historical times, trade was in barter. Barter is a practice in which one commodity is exchanged for another. In international trade, it often happened that a country trading with another was unable to supply a commodity the other country required. In such circumstances, there is need for a commodity that could be bartered in its place. For this purpose, therefore, gold and silver coins were used. With modernisation and population growth, there was an increase in the number and size of trade commodities. As a consequence, there were some practical difficulties in using gold and silver coins as the transaction money. To avoid these, paper currency was used.
It is likely that a region may not be in a position to produce what it needs or it is unable to meet all its requirements when it is produced. Therefore, there arises the need to buy the product from other regions that produce them. This is how trade begins. Geographical and cutlural factors are the bases of trade. Geology, climatic conditions, population, stage of technological development and culture are some of the important factors that determine the demand and quantity of trade.
Geology. The structures and characteristics of rocks of a region depend on the nature of geology of that region. As such the minerals and the fuels mined from beneath the surface differ from place to place. Some minerals are found in some countries alone. For example, petroleum, coal, gold, silver and copper are produced in appreciable quantities only in some countries. Depending upon the nature of the land patterns, the agricultural products also vary. For example, the plantation crops such as coffee and tea are grown on the hill slopes.
Climate. Every agricultural product requires a certain set of climatic conditions. Hence, the agricultural products of a region vary with the climatic conditions obtaining there. For example, sugarcane in tropical areas and oats and barley in the temperate areas are grown in their respective climatic areas. It is thus clear that all crops do not grow in all climatic regions.
Population. The commodities produced in a country are exported only after they have satisfied the demands of the people of that country and a surplus is left over. That is why, whether a commodity is in excess of demand or in deficit, is based on the population number. For example, although India produces more rice than Myanmar, it is able to satisfy only its domestic need. On the contrary, Myanmar, because of its small population, has become a rice exporting country.