Geography · Ch 8 — International Trade
Basis of International Trade
Basis of International Trade
Why countries trade with each other
International trade does not happen by accident. It rests on clear, observable differences between countries. If every nation had the same resources, the same people, and the same level of development, there would be little reason to exchange goods across borders. The textbook identifies five broad bases on which trade rests.
(i) Difference in national resources
The world's resources are spread unevenly because the physical environment itself is uneven. Geology, relief, soil, and climate all vary from place to place, and each variation creates a different trade opportunity.
Geological structure determines what minerals lie beneath the ground. It also shapes the land's surface. Lowlands, with their flat terrain and fertile soil, have greater agricultural potential. Mountains, on the other hand, attract tourists and promote tourism — a service that is also traded internationally.
Mineral resources are distributed very unevenly across the world. Some countries have rich deposits of coal, iron ore, or petroleum; others have none. The availability of mineral resources provides the foundation for industrial development. A country that lacks minerals must import them; a country that has them in surplus can export.
Climate influences which plants and animals can survive in a given region. It ensures diversity in the range of products that different countries can produce. For example, wool production takes place in cold regions, while bananas, rubber, and cocoa can grow only in tropical regions. This climatic diversity is a direct driver of trade — tropical countries export tropical products to temperate countries, and vice versa.
(ii) Population factors
The size, distribution, and diversity of people between countries affect both the type and the volume of goods traded.
Cultural factors give rise to distinctive forms of art and craft that are valued the world over. China produces the finest porcelains and brocades. Carpets of Iran are famous. North African leather work and Indonesian batik cloth are prized handicrafts. These cultural products create a niche in international trade that no other country can easily replicate.
Size of population has a dual effect. Densely populated countries tend to have a large volume of internal trade but little external trade, because most of their agricultural and industrial production is consumed within local markets. The standard of living of the population also matters. Where the standard of living is low, only a few people can afford to buy costly imported goods. A higher standard of living, by contrast, creates demand for better quality imported products.
(iii) Stage of economic development
Countries at different stages of economic development trade different kinds of items. In agriculturally important countries, agro-products are exchanged for manufactured goods. Industrialised nations, on the other hand, export machinery and finished products and import food grains and other raw materials. As a country develops, the nature of the items it trades undergoes a clear shift.