These are associated with government policies and programs. These are based on the following factors:
- Social Consideration: It is in the national interest that there be the promotion of industrialization in backward regions to improve employment, income generation, improvement in intra-generational growth, and overall economic development of backward regions.
- Environmental Consideration: To remove polluting industries from urban regions and areas/regions with high population density; the government uses regulations and plays the role of facilitator, providing incentives and concessions like reducing tax.
Transport & Energy are considered to be vehicles of human civilization and economic growth. Transport and energy connect raw material sources to industry & manufacturing and further to markets. Transport is a quintessential requirement for Intraregional & inter-regional trade and movement of people.
Road Transport is preferred for connecting the local market to local markets and local to regional markets. Internal waterways are preferred for connecting Regional markets to Regional Markets and Regional National markets. These are realized through perennial rivers and canals by steamers and mechanized boats. Examples include the Rhine Waterways of Europe and St. Lawrence Waterways of North America.
Sea Navigation & Air Navigation are capital and technology-intensive, preferred only for Long Distance International Trade and movement of passenger traffic respectively. The important sea routes of the world are:
- North Atlantic Route – Connects the East Coast of USA & Canada to the West Coast of Europe.
- Suez Canal Route – Connects West Europe, West Asia, and the East Coast of Africa to South Asia and Southeast Asia. It was so important that it was also called. “The Lifeline of British India”.
- Cape of Good Hope – This is an alternative to Suez Land Route for Medium & Large ships.
- Panama Route – Connects the East Coast & North America to the West Coast of North America.
- Trans-Pacific Route – It is the most important trade route connecting the West Coast of North America to East Asia, South – East Asia, and Australia.
- Malacca Route – Connects West Asia to East-Asia, South –East Asia, and Western Pacific.
It is a key for new age economies which interconnect economic culture, societies, education & awareness, governance, research and development, the flow of information & ideas. The important communication systems are radio (wireless), landline, satellite communication & mobiles. These systems are transforming the world into a Global Village.
International trade is the exchange and transfer of goods & commodities beyond international borders. If it is between two countries only, it is known as Bilateral Trade and if it is between more than two, countries, it is called Multilateral Trade.
If the value of the export of a country is more than the value of imports then it is known as Trade Surplus, if equal it is known as Trade Balance and if the value of imports is more than the export item, it is called Trade Deficit. Part of import covered by earning through export is called as Terms of Trade. International trade is guided by the following two factors:
The three most important economic factors are:
Complimentarily: It is associated with the unequal distribution of natural resources, population, economic and technological development, cultural & social resources. Because of this unequal distribution. There are countries with deficit and surplus production, countries with the deficit have needs, wants, and purchasing power to surplus producing countries. Therefore, more the complimentarily, more the trade.
Transferability: It is the movement of goods and commodities facilitated by good transport and communication systems.
Intervening Opportunities: It is the relative importance of one trade partner as against the others due to cultural similarities, political uniformity, similar ideology, geographical proximity, etc.
Non- Economic Factors or Trade Policies
Trade Policies are broadly classified into two policies:
Inward Oriented Trade Policies: These are based on protection to domestic producers and discrimination between domestic and foreign producers. This policy is also known as Trade Restriction and Import Substitution. These are the weapons of inward-oriented trade policies:
- Tariff Barriers: These are high custom Duties on imports.
- Non Tariff Barriers: These are quantitative restrictions and qualitative restrictions.
- In Quantitative Restrictions: We have Quota (Fixing Limit), Licensing (Permits), Canalization (Foreign Trade carried out by the state instead of private parties)
- Qualitative restrictions: Could be on the bases of environmental considerations like Phyto-sanitary measures, sanitary Measures, Polluting Industry to believed Environmental Tax or social considerations like child labor & lack of labor reform.
Outward Oriental Trade Policies: Here, international trade is considered as a source of economic growth, a rise in income, better employment, modernization of the economy, and improvement in economic efficiency and productivity. These policies are called Trade Liberalization & Export Promotion which form one of the bases of globalization. International trade expands under this trade policy.
In outward-oriented trade policies, there is a gradual reduction of the tariff, & non-tariff barriers eventually resulting in complete removal. For this purpose, GATT was established in 1947 which was later on replaced by WTO by 1995
Trends in Global Trade
In the post World War-II Era, global trade is increasing in terms of composition and direction (trade partner) of international trade. Global trade is directly connected to the global business cycle. There is a contraction in global trade during recession and expansion during recovery and economic growth.
Global trade is dominated by developed countries as their trade basket is highly diversified and specialized. Developed countries are large exporters of industrial and manufactured products (consumption goods) and technology (capital goods).
Trade among developing countries is low because their trade basket is almost similar. These are large exporters of agricultural products and minerals. With the rise of emerging economies, the contribution of developing countries to global trade is increasing the USA IS the largest trading country, considered to be the growth engine of the global economy. China is now the largest exporter in the world Crude oil is the largest traded commodity in the world. International trade is dominated by sea navigation.