Meaning and Need for International Trade

International trade is the exchange of goods and services across national borders — one country selling (exporting) goods to another, and buying (importing) goods from it. It differs from trade within a country (internal trade) mainly because it crosses currencies, tariff barriers, and separate national economic policies, none of which apply when goods move between two cities of the same country.

No country is self-sufficient in every good it needs. Differences in natural resources, climate, labour skill, capital availability and technology mean that every country can produce some goods more efficiently than others, and less efficiently than others in still other goods. International trade lets each country specialise in what it produces relatively efficiently and exchange that surplus for goods it would otherwise have to produce at a higher real cost — raising total output and consumption possibilities for all trading countries taken together, compared to a world where every country tried to produce everything it needs on its own.