International Trade
Written by Anuar Burkitbayev and Alexey Dudarev
Countries can trade with each other just like we purchase groceries or pay online on a daily basis. When countries are the parties in a transaction, it’s called international trade. Nations may buy goods and services from other countries because they lack some natural resources and therefore are unable to produce certain goods. Goods that are sold to other countries are called exports and goods which are bought from other countries are called imports.
However, unlike the trade we are used to, international trade has more difficulties in its process. Let’s look at an example - England is exporting milk to France, bringing revenue to English companies and the government through taxes. But French companies are losing money due to that, and therefore the tax revenue is less than it could have been. So France imposes trade barriers to discourage its people from buying English milk.
But what are these trade barriers you might ask? There are several types of trade barriers, including:
Tariffs - taxes on imported goods to make them more expensive so fewer people would buy them
Quotas - limitations on the volume of imported goods allowed into a country
Embargo - a complete ban on a certain imported good, or on all imports from a certain country
Subsidies - money paid to domestic producers so their goods would cost less.
That way a country can increase employment and amount of money in circulation within the country. That way, a small ice cream shop will stand a chance against a large international ice-cream corporation.
