International Trade: Definition, Benefits, Types and Factors

Understanding International Trade

What is the understanding of international trade and what is the benefit of the economy in a country? For those who learn about economics, of course it is familiar with this topic because it is quite often discussed.

International trade is an interstate interaction in the form of selling goods or services on the basis of mutual agreement. International cooperation in the field of trade is not a thing that has just begun, but it has been around since medieval times.

Economic relations between countries include three forms of relationships, including:

  • Exchange of results or outputs from a country with other countries, or we know with international trade
  • Relationship in the form of debt receivable between countries
  • Exchanges or streams of production or production facilities

One of the objectives of international trade is to increase GDP (Gross Domestic Product) or the total value of production of goods and services within a country for one year. The impact of international trade can be felt in terms of social, political, and economic interests to help drive the advancement of industrialization, transportation, globalization and the presence of multinational corporations.

International trade in general

Trade can be interpreted as a process of swinger that occurs on the basis of a mutual agreement of the parties involved in it. Countries in the world have not been able to produce all of their own goods and needs, they should receive assistance from other countries.

This process then becomes inter-state trade activities, or export-import activities. Trade between countries is called international trade.

From the explanation, it can be concluded that the understanding of international trade is the trading activities made by one country with other countries, where this happens as a result of the limitations of existing resources of the country. Inter-state trade plays an important role in fulfilling the needs of a country that cannot be produced in the country, whether it is due to limited natural resources, human resources, capital, or skill.

Both parties can be between individuals (individuals with individuals), among individuals with governments of a country, or between governments of each country.

Thus inter-state trade allows the occurrence of:
  • Trading or swinger goods and/or services between countries
  • Economic cooperation between countries around the world
  • Effect on the development of export and import and Balance of Payment/international Balance of payments (NPI) of a country
  • Exchange and expansion of the use of technology so as to accelerate the economic growth of the country involved in it
  • The movement of resources through state boundaries, both human resources, natural resources, and capital resources
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International Trade Benefits

After understanding the understanding of international trade, surely we also need to know what the benefits are. The existence of international cooperation in the field of trade can provide several benefits and advantages that can be obtained from each country that cooperate in the field of trade.

These benefits include:

  • Can obtain goods or services that can not be produced by themselves because of differences in natural resources, human resource capabilities, technology and others.
  • Can expand the market for the purpose of adding profits from specialty
  • Enables the transfer of modern technologies to understand more efficient and modern production techniques in terms of management.
  • Can accelerate the economic growth of a country
  • Adding country foreign exchange from export results
  • International trade can open employment in a country
  • Establishing friendships with other countries
  • Improving the deployment of a country's natural resources
  • International Trade Driving factors
  • International cooperation in the field of trade occurs due to several driving factors that require a country to conduct cooperation in the field of trade. Because every country can not fully meet the needs of its own country without the resources of other countries, can be from natural resources, human resources, investors and in terms of technology.

The following are some of the driving factors of international trade:

1. The existence of free market

Economic freedom or liberalism has begun to be implanted in international trade. Anyone has the right to upgrade and expand their market to sell cross-country products.

Free markets are needed to improve cooperation between countries that have the opportunity to increase country revenue. Economic freedom is a trigger for individuals and groups to compete to increase market and increase production.

2. The difference in geographic conditions

Each country has a different geographical state than other countries that cause differences in the resources it generates.

For example, spices are only obtained in tropical areas such as Indonesia, so Indonesia becomes the largest supplier of spices in some Western countries. Every country can not fulfill all the resources needed so it is necessary to do exchanges with other countries.

3. Improved technological development and information

Nowadays, to interact with other countries, we do not have to meet face-up, because all communication can now be done with Internet-based information technology.

The development of digitization and communication equipment triggers each country to increase its production to be marketed to other countries assuming that the country cannot provide such goods or services.

4. Technological differences

It is not only the differences in its natural resources, but the differences in human resources can also cause differences in technological capability. The difference in this technology causes a country that can only produce raw goods must export to another country to be processed and imported back to the country at a more expensive price.

Likewise, if a country only advanced in technology without the supply of natural resources, it needs the help of other countries. This is the role of a mutually beneficial international trade

5. Save money

International trade is assessed to produce a wider market and more revenue than if it is only produced domestically. So that production in large scale can certainly save the cost to be spent on production (fixed cost).

Types of international trade

There are several types of international trade conducted between countries and groups of countries. Referring to the understanding of international trade above, as for some of its types are as follows:

1. Export and Import

The most common form of international trade. There are two ways to export, i.e. regular exports (through applicable provisions) and exports without L/C (goods can be delivered via the Trade department permit).

2. Barter

Currently, barter or exchange of goods with goods is still often done in international trade. The type includes direct barter, switch barter, counter purchase and bay back barter.

3. Consignment

Consignment is a sale with delivery of goods abroad where there is no particular buyer abroad. Sales can be made through a free market or trading exchange by means of auction

4. Package Deal

Trades made through trade agreements with other countries.

5. Border Brossing

Trade arising from two adjacent countries to facilitate the residents to make transactions with each other.

International trade is an important agenda of a country not just commercial gains, but also in terms of cooperation between nations.


Above is an explanation of international trade understanding, benefits, types, and the supporting factors. Hopefully this article adds to our insight into the benefits of international cooperation and matters relating to the topic.

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