Scribd
Upload
353 views12 pages

International Trading System

International trade has existed for centuries and allows countries to access goods and services not available domestically. Early economic thinkers like Adam Smith and David Ricardo recognized the benefits of specialization and comparative advantage between nations. The modern international trading system evolved from mercantilism through increasing economic liberalization. Major events like the world wars disrupted global trade before organizations like the League of Nations, GATT, and WTO helped establish rules and agreements to promote more open and cooperative international exchange.

Uploaded by

Asereth
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
353 views12 pages

International Trading System

International trade has existed for centuries and allows countries to access goods and services not available domestically. Early economic thinkers like Adam Smith and David Ricardo recognized the benefits of specialization and comparative advantage between nations. The modern international trading system evolved from mercantilism through increasing economic liberalization. Major events like the world wars disrupted global trade before organizations like the League of Nations, GATT, and WTO helped establish rules and agreements to promote more open and cooperative international exchange.

Uploaded by

Asereth
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 12

Early International

Trading System
https://allvalue.com.ph/alldaysupermarket/
What is International Trading System?

International trade is the exchange of goods and


services between countries
It allows countries to expand their markets and
access goods and services that otherwise may
not have been available domestically. As a result
of international trade, the market is more
competitive. This ultimately results in more
competitive pricing and brings a cheaper product
home to the consumer.
We all know that international trade has been in
vogue for centuries and all civilizations carried
on trade with other parts of the world. The need
for trading exists due to the variations in
availability of resources and comparative
advantage. In the present context where
technology and innovation in all fields have
thrown open borders to globalization, no
country can afford to remain isolated and be
self-sufficient.
Trading globally gives consumers and countries the
opportunity to be exposed to goods and services not
available in their own countries, or which would be
more expensive domestically.
The importance of international trade was
recognized early on by political economists like
Adam Smith and David Ricardo.
Still, some argue that international trade actually
can be bad for smaller nations, putting them at a
greater disadvantage on the world stage.
Understanding International Trade
International trade was key to the rise of the
global economy. In the global economy, supply
and demand—and therefore prices—both impact
and are impacted by global events.
Imports and Exports
A product that is sold to the global market is
called an export, and a product that is bought from
the global market is an import. Imports and
exports are accounted for in the current account
 section in a country's balance of payments.
Global trade allows wealthy countries to use their
resources—for example, labor, technology, or capital—
more efficiently. Different countries are endowed with
different assets and natural resources: land, labor,
capital, and technology, etc. This allows some countries
to produce the same good more efficiently—in other
words, more quickly and with less of a cost. Therefore,
they may sell it more cheaply than other countries. If a
country cannot efficiently produce an item, it can obtain
it by trading with another country that can. This is
known as specialization in international trade.
For example, England and Portugal have historically both
benefited by specializing and trading according to their
comparative advantages. Portugal has pentiful vineyards
and can make wine at a low cost, while England is able to
more cheaply manufacture cloth given its pastures are
full of sheep. Each country would eventually recognize
these facts and stop attempting to make the product that
was more costly to generate domestically in favor of
engaging in trade. Indeed, over time, England stopped
producing wine, and Portugal stopped manufacturing
cloth. Both countries saw that it was to their advantage
to stop their efforts at producing these items at home
and, instead, to trade with each other in order to acquire
them.
EARLY INTERNATIONAL TRADING SYSTEM
International trade has a rich history starting with barter system
being replaced by Mercantilism in the 16th and 17th Centuries. The
18th Century saw the shift towards liberalism. It was in this period
that Adam Smith, the father of Economics wrote the famous book
‘The Wealth of Nations’ in 1776 where in he defined the importance
of specialization in production and brought International trade
under the said scope. David Ricardo developed the Comparative
advantage principle, which stands true even today.
All these economic thoughts and principles have influenced the
international trade policies of each country. Though in the last few
centuries, countries have entered into several pacts to move
towards free trade where the countries do not impose tariffs in
terms of import duties and allow trading of goods and services to
go on freely.
The First World War changed the entire course of the world trade
and countries built walls around themselves with wartime controls.
Post world war, as many as five years went into dismantling of the
wartime measures and getting back trade to normalcy. But then the
economic recession in 1920 changed the balance of world trade
again and many countries saw change of fortunes due to fluctuation
of their currencies and depreciation creating economic pressures on
various Governments to adopt protective mechanisms by adopting
to raise customs duties and tariffs.
The need to reduce the pressures of economic conditions and ease
international trade between countries gave rise to the World
Economic Conference in May 1927 organized by League of Nations
where in the most important industrial countries participated and
led to drawing up of Multilateral Trade Agreement. This was later
followed with General Agreement of Tariffs and Trade (GATT) in
1947.
However once again depression struck in 1930s
disrupting the economies in all countries leading to rise
in import duties to be able to maintain favorable
balance of payments and import quotas or quantity
restrictions including import prohibitions and licensing.
Slowly the countries began to grow familiar to the fact
that the old school of thoughts were no longer going to
be practical and that they had to keep reviewing their
international trade policies on continuous basis and
this interns lead to all countries agreeing to be guided
by the international organizations and trade
agreements in terms of international trade.

You might also like