International Trade and Commerce
For the very survival man had to engage himself in trade. It began with the primitive barter which means exchanging one thing for another. With the growth of civilization and advent of international trade, barter was replaced by the complex world of the market place. Money, standard weights and measures were developed to facilitate exchange.
Today the market place allows products, processes and even ideas to be exchanged between nations.
There are a number of reasons why international trade takes place. All the countries of the world cannot produce all the goods they need. So the common and primary reason is that the countries which have surplus” commodities or unused resource try to export them to the countries where they are not produced or are not available.
As we know, at an early stage, trade was confined to only exchange of goods called barter. But barter had certain limitations because when a farmer wanted meat in exchange for his food-grains, the hunter did not need them. So man thought out a common means of exchange what we now call money.
But as trade has become international, transaction between countries has become complicated too for there exist in different countries different kinds of money with different values. To solve this problem, mechanisms have been developed with much care arid in great detail to effect transfer of payments from one country to another.
By selling or exporting goods and services to other countries we earn foreign exchange. This foreign exchange is used in importing the goods and services we need. So in international trade, foreign exchange plays a vital role. In fact, the more a country exports, the high is its foreign exchange earning.