International trade

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International trade is the exchange of capital, goods, and services across international borders or territories[1] because there is a need or demand for goods or services.[2]

In most countries, such trade represents a significant share of gross domestic product (GDP). While international trade has existed throughout history (for example Uttarapatha, Silk Road, Amber Road, salt roads), its economic, social, and political importance has been on the rise in recent centuries.

Carrying out trade at an international level is a complex process when compared to domestic trade. When trade takes place between two or more states, factors like currency, government policies, economy, judicial system, laws, and markets influence trade.

To ease and justify the process of trade between countries of different economic standing in the modern era, some international economic organizations were formed, such as the World Trade Organization. These organizations work towards the facilitation and growth of international trade. Statistical services of intergovernmental and supranational organizations and governmental statistical agencies publish official statistics on international trade.

Characteristics of global trade

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Trading globally may give consumers and countries the opportunity to be exposed to new markets and products. Almost every kind of product can be found in the international market, for example: food, clothes, spare parts, oil, jewellery, wine, stocks, currencies, and water. Services are also traded, such as in tourism, banking, consulting, and transportation.

File:SeidenstrasseGMT.JPG
The ancient Silk Road trade routes across Eurasia

Advanced technology (including transportation), globalization, industrialization, outsourcing and multinational corporations have major impacts on the international trade systems.

Differences from domestic trade

File:Flight to Newark Liberty International Airport (EWR) with view to Newark Bay - panoramio.jpg
Ports play an important role in facilitating international trade. The Port of New York and New Jersey grew from the original harbor at the convergence of the Hudson River and the East River at the Upper New York Bay.

International trade is, in principle, not different from domestic trade as the motivation and the behavior of parties involved in a trade do not change fundamentally regardless of whether trade is across a border or not.

However, in practical terms, carrying out trade at an international level is typically a more complex process than domestic trade. The main difference is that international trade is typically more costly than domestic trade. This is due to the fact that cross-border trade typically incurs additional costs such as explicit tariffs as well as explicit or implicit non-tariff barriers such as time costs (due to border delays), language and cultural differences, product safety, the legal system, and so on.

Another difference between domestic and international trade is that factors of production such as capital and labor are often more mobile within a country than across countries. Thus, international trade is mostly restricted to trade in goods and services, and only to a lesser extent to trade in capital, labour, or other factors of production. Trade in goods and services can serve as a substitute for trade in factors of production. Instead of importing a factor of production, a country can import goods that make intensive use of that factor of production and thus embody it. An example of this is the import of labor-intensive goods by the United States from China. Instead of importing Chinese labor, the United States imports goods that were produced with Chinese labor. One report in 2010, suggested that international trade was increased when a country hosted a network of immigrants, but the trade effect was weakened when the immigrants became assimilated into their new country.[4]

History

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The history of international trade chronicles notable events that have affected trading among various economies.

Theories and models

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Most traded export products

File:Most traded export products.png

Largest countries or regions by total international trade

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File:Volume of world merchandise exports.png
Volume of world merchandise exports

The following table is a list of the 30 largest trading states according to the World Trade Organization in 2025.[5][6][7]

International trade (billions of USD)
Rank State Merchandise Commercial Services Digitally Delivered Services Total
– World 52,865 18,243 9,625 80,733
– File:Flag of Europe.svg European Union 5,820 3,369 9,189
1 File:Flag of the United States.svg United States 5,692 2,079 1,305 9,076
2 File:Flag of the People's Republic of China.svg China 6,355 1,130 411 7,896
3 File:Flag of Germany.svg Germany 3,307 1,090 605 5,002
4 File:Flag of the United Kingdom (1-2).svg United Kingdom 1,505 1,173 816 3,494
5 File:Flag of the Netherlands.svg Netherlands 1,859 720 445 3,024
6 File:Flag of France.svg France 1,469 783 402 2,654
7 File:Flag of India.svg India 1,198 692 453 2,343
8 File:Flag of Ireland.svg Ireland 293 1,102 929 2,324
9 File:Flag of Singapore.svg Singapore 1,073 807 440 2,320
10 File:Flag of Japan.svg Japan 1,494 503 305 2,302
11 File:Flag of Italy.svg Italy 1,395 342 159 1,896
12 File:Flag of Hong Kong.svg Hong Kong 1,586 211 84 1,881
13 File:Flag of South Korea.svg South Korea 1,341 332 164 1,837
14 File:Flag of Switzerland (Pantone).svg  Switzerland 1,061 401 282 1,744
15 File:Flag of the United Arab Emirates.svg United Arab Emirates 1,326 311 33 1,670
16 File:Flag of Canada (Pantone).svg Canada 1,132 339 183 1,654
17 File:Flag of Belgium (civil).svg Belgium 1,106 331 196 1,633
18 File:Flag of Mexico.svg Mexico 1,348 139 34 1,521
19 File:Flag of Spain.svg Spain 958 378 159 1,495
20 File:Flag of the Republic of China.svg Taiwan 1,135 141 63 1,339
21 Poland 835 212 106 1,153
22 Vietnam 927 70 997
23 Australia 649 205 70 924
24 Brazil 642 153 80 875
25 File:Flag of Thailand.svg Thailand 685 153 35 873
26 Russia 722 139 861
27 File:Flag of Malaysia.svg Malaysia 716 128 844
28 File:Flag of Turkey.svg Turkey 638 180 818
29 File:Flag of Saudi Arabia.svg Saudi Arabia 565 191 33 789
30 File:Flag of Indonesia.svg Indonesia 525 106 31 662

Top traded commodities by value (exports)

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Traded commodities in 2022
Rank Commodity Value in US$
(millions)		 Date of
information
1 Mineral fuels, oils, distillation products 3,988,389 2022
2 Electrical, electronic equipment 3,493,553 2022
3 Machinery, nuclear reactors, boilers, etc. 2,573,572 2022
4 Vehicles (excluding railway) 1,621,658 2022
5 Pharmaceutical products 875,345 2022
6 Pearls, precious stones, metals, coins, etc. 866,839 2022
7 Plastics and articles thereof 815,554 2022
8 Optical, photo, technical, medical, etc. apparatus 669,128 2022
9 Iron and steel 564,547 2022
10 Organic chemicals 537,854 2022

Source: International Trade Centre[8]

Observances

In the US, starting in 1935, the various U.S. presidents have held "World Trade Week" observances to promote large and small companies to be more involved with the export and import of goods and services. This tradition was preceded by a local observance of "Foreign Trade Week" by the Los Angeles Area Chamber of Commerce that originated in 1927 as an expansion of United States National Maritime Day.

Every year the President declares the third week of May to be World Trade Week.[9][10]

International trade vs local production

Food security

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The trade-offs between local food production and distant food production are controversial, with limited studies comparing environmental impact and scientists cautioning that regionally specific environmental impacts should be considered.[16][17] A 2020 study indicated that local food crop production alone cannot meet the demand for most food crops with "current production and consumption patterns" and the locations of food production at the time of the study for 72–89% of the global population and 100 km radiuses as of early 2020.[18][<span title="Script error: No such module "decodeEncode".">clarification needed][19][20][21] Studies found that food miles are a relatively minor factor for carbon emissions, albeit increased food localization may also enable additional, more significant, environmental benefits such as recycling of energy, water, and nutrients.[22] For specific foods regional differences in harvest seasons may make it more environmentally friendly to import from distant regions than more local production and storage or local production in greenhouses.[23]

Qualitative differences and economic aspects

Qualitative differences between substitutive products of different production regions may exist due to different legal requirements and quality standards or different levels of controllability by local production- and governance-systems which may have aspects of security beyond resource security, environmental protection, product quality and product design and health. The process of transforming supply as well as labor rights may differ as well.

Local production has been reported to increase local employment in many cases. A 2018 study claimed that international trade can increase local employment.[24] A 2016 study found that local employment and total labor income in both manufacturing and nonmanufacturing were negatively affected by rising exposure to imports.[25]

Local production in high-income countries, rather than distant regions may require higher wages for workers. Higher wages incentivize automation[26] which could allow for automated workers' time to be reallocated by society and its economic mechanisms or be converted into leisure-like time.

Specialization, production efficiency and regional differences

Local production may require knowledge transfer, technology transfer and may not be able to compete in efficiency initially with specialized, established industries and businesses, or in consumer demand without policy measures such as eco-tariffs. Regional differences may cause specific regions to be more suitable for a specific production, thereby increasing the advantages of specific trade over specific local production. Forms of local products that are highly localized may not be able to meet the efficiency of more large-scale, highly consolidated production in terms of efficiency, including environmental impact.[citation needed][27]

Resource security

File:Water, energy and land insecurity in global supply chains.webm
A video explaining findings of the study "Water, energy and land insecurity in global supply chains"

A systematic, and possibly first large-scale, cross-sectoral analysis of water, energy and land in security in 189 countries that links total and sectorial consumption to sources showed that countries and sectors are highly exposed to over-exploited, insecure, and degraded such resources with economic globalization having decreased security of global supply chains. The 2020 study finds that most countries exhibit greater exposure to resource risks via international trade – mainly from remote production sources – and that diversifying trading partners is unlikely to help countries and sectors to reduce these or to improve their resource self-sufficiency.[28][29][30][31]

Illicit trade

Illegal gold trade

A number of people in Africa, including children, were using informal or "artisanal" methods to produce gold. While millions were making a livelihood through this small-scale mining, governments of Ghana, Tanzania and Zambia complained about the increase in illegal production and gold smuggling. Sometimes the procedure involved criminal operations and even human and environmental cost. Investigative reports based on Africa's export data revealed that gold in large quantities is smuggled out of the country[<span title="Script error: No such module "decodeEncode".">clarification needed] through the United Arab Emirates, without any taxes being paid to the producing states. Analysis also reflected discrepancies in the amount exported from Africa and the total gold imported into the UAE.[32]

In July 2020, a report by Swissaid highlighted that the Dubai-based precious metal refining firms, including Kaloti Jewellery International Group and Trust One Financial Services (T1FS), received most of their gold from poor African states like Sudan. The gold mines in Sudan were seldom under the militias[<span title="Script error: No such module "decodeEncode".">clarification needed] involved in war crimes and human rights abuses. The Swissaid report also highlighted that the illicit gold coming into Dubai from Africa is imported in large quantities by the world's largest refinery in Switzerland, Valcambi.[33][34]

Another report in March 2022 revealed the contradiction between the lucrative gold trade of West African countries and the illicit dealings. Like Sudan, Democratic Republic of Congo (DRC), Ghana and other states, discrepancies were recorded between the gold production in Mali and its trade with Dubai, UAE. The third largest gold exporter in Africa, Mali imposed taxes only on the first 50 kg (110 lb) of gold exports per month, which allowed several small-scale miners to enjoy tax exemptions and smuggle gold worth millions. In 2014, Mali's gold production was 45.8 tonnes, while the UAE's gold imports were 59.9 tonnes.[35][36][37]

Statistics

See also

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References

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Further reading

Sources

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Data

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Statistics from intergovernmental sources

Data on the value of exports and imports and their quantities often broken down by detailed lists of products are available in statistical collections on international trade published by the statistical services of intergovernmental and supranational organisations and national statistical institutes. The definitions and methodological concepts applied for the various statistical collections on international trade often differ in terms of definition (e.g. special trade vs. general trade) and coverage (reporting thresholds, inclusion of trade in services, estimates for smuggled goods and cross-border provision of illegal services). Metadata providing information on definitions and methods are often published along with the data.

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