International trade
Basis and changing patterns of trade, ports as gateways, and the role of the WTO.
The essentials
International trade is the exchange of goods and services between countries. It exists because no country produces everything it needs. The basis of trade includes differences in national resources (geology, climate, minerals), population factors (size, cultural features, demand), stage of economic development, extent of foreign investment and transport.
The balance of trade records the value of goods and services imported and exported. If exports exceed imports, the balance is positive (favourable); if imports exceed exports, it is negative (unfavourable).
Key points
- Bilateral trade: between two countries under agreed terms. Multilateral trade: with many countries.
- Free trade (trade liberalisation): reducing tariffs and barriers. Dumping: selling a good in another country at a price below its cost or below its home price.
- GATT was formed in 1948; it was replaced by the World Trade Organisation (WTO) in 1995. The WTO, headquartered in Geneva, sets rules for global trade and settles disputes among members.
- Regional trade blocs (such as ASEAN, the European Union, OPEC and SAFTA) promote trade among neighbouring countries.
- Ports are gateways of international trade. By cargo: industrial, commercial, comprehensive. By location: inland ports (away from the coast, linked by river or canal) and out ports (deep-water ports away from the main port, e.g. Piraeus serving Athens).
- By function: oil ports, ports of call (refuelling stops, e.g. Aden, Honolulu, Singapore), packet stations (ferry ports for short crossings, e.g. Dover and Calais across the English Channel), entrepot ports (collection centres where goods are re-exported, e.g. Singapore, Rotterdam), naval ports.
Exam tips
Learn one example for each type of port and the dates 1948 (GATT) and 1995 (WTO).
Common mistakes
A negative balance of trade means imports exceed exports, not that the country has no exports.