🌍 International Trade

(Class 12 Geography – CBSE, 2025–26)

1. Introduction

• Trade is one of the oldest economic activities of human beings.
• It refers to the exchange of goods and services between people, regions, or countries.
• When this exchange crosses national boundaries, it becomes international trade.
• International trade is the backbone of globalization because it connects producers, markets, and consumers across the world.

👉 Simple definition:
International trade is the exchange of goods, services, and capital between countries across the world.

2. Importance of International Trade

• Essential for economic growth → no country is self-sufficient.
• Promotes specialization → countries produce what they are best at (comparative advantage).
• Generates employment → in agriculture, industries, services, logistics.
• Improves living standards → availability of foreign goods, technology, and services.
• Strengthens international relations → trade ties bring countries closer.
• Encourages global cooperation → through organizations like WTO, IMF, UNCTAD.

💡 Example: India imports crude oil from the Gulf but exports IT services to USA and Europe.

3. Basis of International Trade

International trade takes place due to differences among countries:

🔹 Resource endowment → Oil in Middle East, Iron ore in Australia, Tea in India.
🔹 Climatic conditions → Bananas in tropical countries, wheat in temperate zones.
🔹 Technological differences → Japan exports electronics, USA exports aircraft.
🔹 Labor & skill availability → India exports IT services and skilled professionals.
🔹 Capital investment → Developed nations invest in production and trade.

4. Types of International Trade

1. Visible Trade (Goods trade)
   • Export & import of physical goods like machinery, oil, tea, textiles.
   • Recorded in balance of trade.
2. Invisible Trade (Services trade)
   • Export & import of services like banking, tourism, IT, shipping.
   • Recorded in balance of payments.
3. Bilateral Trade
   • Trade between two countries.
   • Example: India–Nepal, India–Bhutan.
4. Multilateral Trade
   • Trade among many countries.
   • Example: WTO agreements, ASEAN trade, SAARC trade.

5. Features of International Trade

• Involves crossing national boundaries.
• Conducted in foreign currencies (USD, Euro, Yen, Pound).
• Requires government regulation (customs, tariffs, quotas).
• Highly influenced by transport, communication & political relations.
• Creates interdependence among countries.
• Unequal → developed countries dominate world trade.

6. Major Products in International Trade

(i) Agricultural Products

🌱 Wheat, rice, maize, tea, coffee, cotton, fruits, spices.

(ii) Mineral & Energy Resources

⛏️ Coal, iron ore, bauxite, petroleum, natural gas.

(iii) Manufactured Goods

🏭 Machinery, automobiles, textiles, chemicals, steel.

(iv) Services

💻 IT, tourism, shipping, banking, education.

💡 Example: Gulf countries → petroleum exporters; India → textiles & IT exporters; China → electronics & manufacturing giant.

7. Factors Affecting International Trade

1. Physical factors
   • Location & accessibility (coastal vs. landlocked countries).
   • Natural resources (minerals, fertile land, forests).
   • Climate (crops suited to specific zones).
2. Economic factors
   • Industrial development.
   • Infrastructure (ports, roads, IT).
   • Availability of capital & technology.
3. Political factors
   • Trade policies, tariffs, sanctions.
   • Relations between countries.
4. Social & cultural factors
   • Preferences for specific products (e.g., Indian spices, French wine).
   • Tourism & migration patterns.

8. Favourable Conditions for International Trade

• Good transport and communication network.
• Surplus production for export.
• Political stability and peace.
• Open market policies & liberalization.
• Strategic geographical location (e.g., Singapore, Dubai).

9. Obstacles in International Trade

• Tariffs and quotas (restrictions on imports/exports).
• Political disputes & wars.
• Unequal distribution of resources.
• Economic disparity → developed vs. developing countries.
• Language, currency & legal differences.
• Environmental regulations increasing trade costs.

10. Historical Evolution of International Trade

1. Ancient trade routes
   • Silk Route → connected China, India, Central Asia, Europe.
   • Spice Route → connected India, Southeast Asia with Europe.
2. Colonial trade
   • Colonies supplied raw materials, masters exported finished goods.
   • Example: India exported cotton to Britain; Britain exported textiles back to India.
3. Modern era
   • Post-World War II → GATT (General Agreement on Tariffs & Trade).
   • WTO established in 1995 to regulate world trade.

11. World Trade Patterns

• Developed countries dominate → 70%+ of world trade.
• Developing countries export raw materials, import technology.
• Inter-regional trade is higher in Europe, North America, East Asia.
• Trade blocs (NAFTA, EU, ASEAN, BRICS) shape global trade.

💡 Example:

• Europe trades within EU (free trade zone).
• USA–China are the world’s largest trading partners.
• India’s main partners → USA, China, UAE, EU.

12. Balance of Trade vs. Balance of Payments

• Balance of Trade (BOT) = Export – Import of goods.
  • Surplus BOT → exports > imports.
  • Deficit BOT → imports > exports.
• Balance of Payments (BOP) = BOT + trade in services + remittances + capital flows.

💡 India often has a trade deficit but remittances from NRIs help balance payments.

13. Global Trade Organizations

1. WTO (World Trade Organization)
   • Established 1995, HQ: Geneva.
   • Promotes free and fair trade.
   • Deals with disputes, tariffs, trade barriers.
2. IMF (International Monetary Fund)
   • Provides short-term loans for trade and balance of payment crises.
3. World Bank
   • Provides development loans for infrastructure & trade growth.
4. UNCTAD
   • Promotes trade and development for developing countries.

14. India’s International Trade

• Exports: Textiles, IT services, pharmaceuticals, rice, engineering goods.
• Imports: Petroleum, gold, electronic goods, machinery.
• Major partners: USA, UAE, China, EU, ASEAN.
• Trade policies: Liberalization (1991), FTAs with ASEAN, BIMSTEC.

💡 Projects improving trade: Sagarmala (ports), Bharatmala (roads), Make in India.

15. Case Studies / Examples

• Suez Canal → connects Europe with Asia, reduces travel time.
• Panama Canal → connects Atlantic & Pacific oceans.
• Trans-Siberian Railway → important for Eurasian trade.
• India–USA IT trade → example of invisible trade.

16. Key Terms for Exams

• Globalization → interconnectedness through trade, tech, culture.
• FTA (Free Trade Agreement) → pact to reduce tariffs.
• Tariff → tax on imports/exports.
• Quotas → fixed quantity allowed in trade.
• Dumping → selling goods below cost price in foreign markets.
• E-commerce → online trade across countries.

17. Importance of International Trade in Present World

• World economy depends on movement of goods & services.
• Interdependence → no country is fully self-reliant.
• Promotes peace → trade ties reduce conflicts.
• Boosts technology transfer → developing countries get advanced know-how.
• Supports globalization → flow of culture, people, and ideas.

18. Sample Answer Frames (Exam Help)

(i) 3 Marks Q: Define international trade and give an example.
👉 International trade is the exchange of goods, services, and capital across national boundaries. Example: India exports IT services to the USA and imports petroleum from Gulf countries.

(ii) 5 Marks Q: Explain factors influencing international trade.
👉 Physical (resources, location), Economic (infrastructure, capital), Political (policies, relations), Social (demand, culture). Together, they determine trade patterns among nations.

(iii) 6 Marks Q: Discuss India’s international trade.
👉 India exports textiles, IT, pharmaceuticals; imports petroleum, electronics, gold. Major partners: USA, China, UAE, EU. Policies: Liberalization, FTAs, Make in India. Importance: boosts GDP, employment, technology transfer.