International trade can be defined as trade that involves the exchange of goods and services between two or more countries. The theory of international trade is based mainly on the economic principle of comparative cost put forward by David Ricardo. International trade different from internal or home or domestic trade in that internal trade is involved with the exchange of goods and services among the people within a particular country. An example of international trade is Trade between Cameroon and India. An example of internal trade in Cameroon is trade between limbe and Bamenda. The items of internal trade include those goods and services which are being produced to be sold locally within the country without crossing international bouandries. For example Rice, Cars, Clothes etc.
DIFFERENCES BETWEEN INTERNAL TRADE AND INTERNATIONAL TRADE
Internal trade differs from international trade in the following way
✓ Distance: With internal trade, distance is much more shorter than on international trade.
✓ Trade Restrictions : Internal trade is trade without major trade restrictions while internal trade is trade with restrictions such as quotas, tarrifs, embargoes, exchange controls etc.
✓ Currencies: With internal trade, there is the use of only one currency which is considerred as a legal tender while in international trade, there is the use of more than one currency such as the Yen, Dollars, pounds etc
✓ Language Problems: Internal trade is Subjet to a limites number of languages thus little language Problems whereas international trade involves séries of languages which makes communication very difficult.
✓ Foreign Exchange earner: Internal trade is not a foreign exchange earner while international trade is a foreign exchange earner.
✓ Transport cost: Since distances are shorter in internal trade than international trade ans with the principle of the longer the distance the higher the transport cost. Therefore transport cost are higher in international trade than in internal trade.
TYPES OF INTERNATIONAL TRADE
International trade can be broadly divided into two main types which are:
A). Bilateral trade: This refers to trade which takes place between two nations only. For example trade between India and Brazil.
B). Multi-lateral trade: This refers to the exchange of goods and services between more than rwo countries or nations. For example India Can trade with Britain, France, Japan etc. Multi-lateral trade is necessary if the total volume of the World trade is to be raised to its maximum
THEORIES ON INTERNATIONAL TRADE
The theories of international trade are based on the sole idea of specialisation. They include the absolute cost advantage and the comparative cost advantage
I. ABSOLUTE ADVANTAGE : This principle of absolute advantage refers to a situation where a country using the same resources produces a greater output than another country
II. COMPARATIVE COST ADVANTAGE: This simply describes a situation where a country should specialise in the Production of a commodity which has lower opportunity cost than her trading partners.
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