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3 The International Trading Environment

Learning Outcomes

At the end of this unit you should be able to:

• Understand the changing nature of the international trading

environment

• Discuss the effects and implications of the factors impacting on world
trade

• Explain the key trends of the major trading blocs around the world

3.1 Introduction

This unit investigates the definition and benefit of international trade, and

the differences between domestic and international trade. It looks at why
nations trade. Theories of international trade are reviewed, because it is

important to understand the roots of modern international theories and
practices. The pattern of development in emerging economies – more
countries reaching a high national growth rate – is considered, along with

a look at less developed countries and the opportunities (or lack of them)
that exist for them.

3.2 The definition and the benefit of international trade

International trade is the purchase, sale or exchange of goods and

services across national borders. It is one of the ways that countries
connect economically. International trade is a complementary as well as
competitive activity. Also, by trading with each other according to

comparative advantage, each trading country enjoys the benefit of
specialisation (Harrison et al., 2000; McDonald and Burton, 2002; Doole

and Lowe, 2008). The history of international trade can be seen from two
points of view. One is that free trade is best both for individual countries
and for others related to them. The other view is that free trade makes it

hard for people in a particular country to make a living. Both views have
some truth. However, it is generally agreed that free trade is preferable