Geography: Class 12 (Part 1) — Chapter 8: International Trade

Introduction & History of International Trade

Trade means the voluntary exchange of goods and services. It can be conducted at two levels: national and international. International trade is the exchange of goods and services among countries across national boundaries.

Evolution of Trade

Barter System: The primitive form of trade where direct exchange of goods took place without money.
Salarium: The Latin origin of the word 'salary', meaning payment by salt, which was a rare and precious commodity in ancient times.
Silk Route: An early 6,000 km long-distance trade route connecting Rome to China, facilitating the trade of Chinese silk, Roman wool, and precious metals.
Slave Trade: A lucrative trade emerging from the 15th century where Portuguese, Dutch, Spaniards, and British captured and transported African natives to the Americas for plantation labour. It was abolished in Denmark (1792), Great Britain (1807), and the USA (1808).

Basis of International Trade

Key Factors Influencing Trade

Difference in National Resources: Uneven distribution due to physical makeup.
- Geological structure: Determines mineral resource base and topography. Lowlands support agriculture, while mountains promote tourism.
- Mineral resources: Provide the foundation for industrial development.
- Climate: Influences flora and fauna (e.g., wool in cold regions, rubber and cocoa in tropical regions).
Population Factors:
- Cultural factors: Distinctive art and crafts (e.g., China's porcelain, Iran's carpets, Indonesian batik).
- Size of population: Densely populated countries have high internal trade but limited external trade as production is consumed locally.
Stage of Economic Development: Determines the nature of items traded (e.g., agro-products vs. manufactured goods).
Extent of Foreign Investment: Boosts trade in developing countries by funding capital-intensive industries like mining and oil drilling.
Transport: Expansion of rail, ocean, and air transport along with refrigeration has expanded trade spatially.

Balance of Trade & Types of Trade

Balance of Trade (BOT)

Balance of Trade records the volume of goods and services imported and exported by a country.

$$\text{Balance of Trade} = \text{Value of Exports} - \text{Value of Imports}$$

Favourable Balance of Trade: Value of exports is greater than the value of imports.
Unfavourable Balance of Trade: Value of imports is greater than the value of exports, leading to exhaustion of financial reserves.

Types of International Trade

Bilateral Trade: Conducted between two countries entering into mutual agreements to trade specific commodities.
Multilateral Trade: Conducted among many trading countries, where a country can trade with multiple partners and may grant Most Favoured Nation (MFN) status.

Free Trade, WTO & Regional Blocs

Free Trade & Dumping

Free Trade (or trade liberalisation) is the act of opening up economies by reducing trade barriers like tariffs. However, it can lead to dumping.

Dumping: The practice of selling a commodity in two countries at a price that differs for reasons not related to costs, which can harm domestic producers.

World Trade Organisation (WTO)

Originally established as GATT (General Agreement on Tariffs and Trade) in 1948, it was transformed into the World Trade Organisation (WTO) on January 1, 1995.

Headquarters: Geneva, Switzerland.
Membership: 166 countries (as of December 2024), with India as a founder member.
Functions: Sets global trade rules, resolves disputes, and covers services like telecommunications and intellectual property.

Regional Trade Blocs

Formed to encourage trade among countries with geographical proximity and complementarities. Today, 120 regional trade blocs generate 52% of world trade.

Gateways of International Trade: Ports

Ports are the chief gateways of international trade, providing facilities for docking, loading, unloading, and cargo storage.

Classification of Ports

Basis of Classification	Port Type	Description & Examples
Cargo Handled	Industrial Ports	Specialise in bulk cargo like grain, sugar, ore, oil, and chemicals.
	Commercial Ports	Handle general packaged cargo, manufactured goods, and passenger traffic.
	Comprehensive Ports	Handle bulk and general cargo in high volumes (most great world ports).
Location	Inland Ports	Located away from the coast, linked to the sea via rivers/canals (e.g., Manchester, Kolkata, Memphis).
Location	Out Ports	Deepwater ports built away from parent ports to receive very large ships (e.g., Athens and its outport Piraeus).
Specialised Functions	Oil Ports	Deal in processing and shipping oil (e.g., Maracaibo, Esskhira, Abadan).
	Ports of Call	Originally refuelling and watering points on main sea routes (e.g., Aden, Honolulu, Singapore).
	Packet Stations	Ferry ports exclusively for passengers and mail across short water bodies (e.g., Dover and Calais).
	Entrepot Ports	Collection centres where goods are brought from different countries for export (e.g., Singapore, Rotterdam, Copenhagen).
	Naval Ports	Ports of strategic importance serving warships with repair workshops (e.g., Kochi, Karwar).