In this article we are going to take a look at what an international trade is and what a domestic trade is and the differences between these two types of trades.
We all know that to trade means to sell or buy goods and services. The process of buying and selling of goods and services is basically what we refer to as ‘Trade’. Trade can be broken down into two types, namely domestic trade and international trade.
What is domestic trade?
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.
What is international 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
- Domestic trade always takes place within the borders of a given country, while international trade always goes beyond the borders of a given country.
- Domestic trade can never involve more than one country, but international trade always involves two or more countries.
- 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.
- 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.
- 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.
- 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.