Institute of Southern Punjab (ISP) Multan: Southern Business School (SBS)
Institute of Southern Punjab (ISP) Multan: Southern Business School (SBS)
Assignment No: 05
Discipline: BBA
Section:B
Date:01/06/20
What is meant by trade describe in detail the difference between local and international trade?
Answer#
Trade involves the transfer of good & services from one person or entity to another, often in
exchange for money. Economists refer to a system or network that allows trade as a market.
Domestic trade can also be called an internal trade. A domestic trade is a trade which is within
the borders of a given country. For example, all trading activities that go on within your country
are referred to as domestic trade.
International trade on the other hand is any business transaction that occurs between two or more
countries. All businesses that are transacted across the boundaries of your country fall under
international trade. For example, if the United States imports cocoa from Ghana, then we refer to
that as an international trade. International trade can either occur between one country and
another country or between people located in different countries. Another name for international
trade is foreign trade.
More on the major differences between domestic trade and international trade
1. Domestic trade always takes place within the borders of a given country, while
international trade always goes beyond the borders of a given country.
2. Domestic trade can never involve more than one country, but international trade
always involves two or more countries.
3. Domestic trade, to a large extent involves the use of mainly local currency in trading,
whereas international trade involves the use of foreign currencies. The U.S. dollar is
the standard currency used in international trade.
4. Domestic trade is free off restriction, so long as it is a legal commodity being traded.
Legal and wholesome commodities dealt with in domestic trade can move around the
country without facing any forms of restrictions such as embargoes and quotas. But
this is not the case for international trade. In international trade, certain goods, though
legal, can be subjected to certain restrictions such as embargoes and quotas. There are
so many reasons why sometimes commodities dealt with in international trade face
certain restrictions. Some of these reasons include the following, in order to protect
infant industries within a country, in order to raise the level of employment within a
country, in order to discourage the importation of legal but harmful goods such as
tobacco into a country, in order to ensure self-sufficiency, etc.
5. Domestic trade is not subject to being controlled by external bodies, but this isn’t the
same for international trade. International trade is controlled by certain external bodies
to which a country is a member. A very good example of an external body that
controls trade all over the world is the World Trade Organization.
6. International trade generally involves very long distances, but this is normally not the
case with domestic trade. Take for example a trade between South Africa and Sweden
or between New Zealand and Egypt. These trades certainly involve very lengthy
distances to be covered. But a trade between any two points in South Africa or
Sweden can never be that lengthy.