What Are the Different Types of International Trade?
International trade is simply the exchange of services and goods across various geographical borders. The types of international trade include inter-firm trade, intra-industry trade, intra-firm trade, inter-industry trade. All of these types of international trade involve the importation or exportation of goods and service. The only difference is the scope and methods in which the various trades are applied.
One type of trade included in types of international trade is intra-industry trade in which importers import goods that are similar to those produced in the country. An example of this type of sale can be seen in the importation of automobiles. Practically every country that produces automobiles also imports other types of automobiles from other countries.
In intra-firm trade, the international trade is confined to various arms or subsidiaries of a multi-national corporation. The corporation may be a franchise or it may simply be a big organization with international outlets. Inter-firm trade occurs between different types of companies that produce different types of goods. This type of trade may be seen in the case of a supplier of raw materials and a company that is importing the raw materials, which is based in another country.
Inter-industry trade refers to the method of trade whereby parties from two countries exchange goods that are not manufactured in either country. For example, a country that has oil may export the oil to a country that has no oil deposits, and as such is incapable of manufacturing oil. The destination country may in turn export apples to the oil-producing country. The oil-producing country may not have the right weather for the growth of apples. In this case, an inter-industry trade has occurred between the two countries, since the items that were exchanged were items that could not be manufactured or produced in either country. Sometimes the reasons why the countries are not able to manufacture the items may include a lack of technical ability to produce the item or lack of raw materials.
Even though it is mainly material items in inter-industry trade that are included in the types of international trade, intangible items like skills and services are also involved. For instance, country A could recruit experts from country B to come and help them design and build a subway system. Country B could also recruit skilled agricultural workers from country A to come and help them implement an effective agricultural irrigation system. In this case, an inter-trade in skills has occurred.
@post 2: That is intra-firm trade. @post 1: Because international trade occurs when there is exchange of goods and services, there is also a need of comparisons to facilitate trade.
@fBoyle-- Are you talking about something like automobile manufacturing?
I know that many automobiles have parts come in from different countries and it's all usually assembled in one country and then exported. I think some Toyotas are assembled here in the US but all of the parts come from Japan. I assume this would be considered intra-firm trade because the goods coming in are different, not same.
That's a good question though. I've also started seeing on some electronic gadget labels that the parts are made in different countries and then it says "assembled" in so and so country.
@turquoise-- What about when a country imports parts of a good but puts the parts together itself and then sells it to other countries? Is this intra-industry or intra-firm trade?
I think inter-industry trade doesn't only occur because a country doesn't have the means or resources to produce a good, but also because it is inefficient for them to do so. This is called comparative advantage and it's the main theory that international-trade is based on.
So, for example, US buys a lot of plastic goods from China. This is not because US doesn't have the capability or resources to produce plastic. It's because China is more efficient at producing these goods and can do so more cheaply. So China has a comparative advantage in plastic goods. It makes more sense to import these goods rather than producing it ourselves.
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