Q.What is meant by international trade? State any two reasons why countries trade with each other.

International trade means the exchange of goods and services across national borders, made necessary because natural resources, technology and skills are not evenly spread across countries.

International trade refers to the exchange of goods and services between the residents (individuals, firms, or governments) of two or more different countries. It differs from internal (domestic) trade in that it crosses national boundaries, involves different currencies, and is subject to each country's own customs laws, tariffs and foreign trade policy.

Why countries trade with one another:

1. Uneven distribution of natural resources — minerals, fertile land, forests, and favourable climate are not spread evenly across the globe. A country rich in petroleum trades with one rich in agricultural land, since neither can produce everything it needs domestically at reasonable cost.
2. Comparative cost advantage — even where a country could technically produce a good itself, it is often cheaper, given the country's skills, technology and factor costs, to specialise in what it produces most efficiently and import the rest. This specialisation and exchange raises total output and lowers costs for both trading partners.

Other reasons commonly cited include differences in the level of technology and labour skill between countries, and the wish to access a wider range and larger volume of goods than domestic production alone can supply. Because of these reasons, virtually every modern economy — including India, and export-oriented states within it such as Andhra Pradesh — participates actively in international trade rather than trying to be self-sufficient in every good.

Students often define international trade only as 'export of goods', forgetting that it covers imports and entrepot trade too. Another common slip is naming only one reason for trade (usually 'resources differ') and not developing the comparative cost advantage point separately, which examiners look for as a distinct reason.