ECONOMICS January 20, 2017February 23, 2017adminshare this
Trade is the defined as the exchange of goods and services between person or entity to another. The trade involves buying and selling of goods and services. Trade is the central activity in the economy. Trade not only refers to the exchange of goods and services within the country but also between two or more countries.
Trade is basically divided into two types,
1. Home Trade
2. Foreign Trade.
Trade is the oldest and most important economic nexus among nations.Indeed, trade along with war had been central to the evaluation of international relations – Robert Gilpin
Home trade is also called as “Domestic Trade”. Home trade is the trade that happens within the boundaries of the country. It means the exchange of goods and services are only made within the geographical boundaries of the country. The seller and buyer of the goods are from the same country.
Foreign Trade is also called as “International trade”. Foreign Trade is the trade that takes place between two or more countries. Foreign Trade involves the transfer of goods from one country to the other country. The seller and buyer of the goods are from different countries.
The below given comparison chart shows some of the differences between Home trade and Foreign Trade
HOME TRADEFOREIGN TRADEHome trade refers to the trade within the borders of the country.Foreign Trade refers to the trade between two or more countries. Exchange of CurrenciesThere is no exchange of currencies takes place in the Home trade because there is a same currency in the country.Foreign Trade involves the exchange of currencies between the nations which are involved in the trade. Restrictions on transfer of goodsHome trade usually doesn’t have any restrictions on movement inside the country.Foreign Trade is subjected to many restrictions on transfer to certain goods to certain countries. Transportation costsHome Trade generally has fewer transportation costs and risks to transfer the goods.Foreign Trade involves very high transportation costs and risky situations to transfer goods from one country to another. Transport SystemsHome Trade depends upon the network and internal transport systems like roads, railways, etc.Foreign Trade depends upon the seaways and the airways between the countries involved in the trade. Benefit to CountryHome trade leads to economic development and self-sufficiency of the country.Foreign Trade leads to the economic interdependence between the countries. ApprovalsThe home trade involves fewer documentations and approvals from the government to transfer the goods.Foreign Trade involves more documentations and approvals from government and it is a long process to get approvals from government. Volume of TradeThe volume of the trade depends upon the population of the country, demand for the product, etcForeign Trade has many restrictions imposed on free entry of goods and many duties and taxes have to be paid to trade goods between countries. Time GapHome trade usually have less time gap between the goods dispatched and goods received and payment received for the consignment.Foreign Trade involves wide time gap between the goods dispatched from the home country and goods received by the other country. Credit ProblemsIn the case of Home Trade, there are fewer credit problems between the sellers and buyers in the country.Foreign trade involves special steps to find out the credit worthiness of the importer by the exporter of the goods. Trading of GoodsHome trade only involves the trade of the goods and services which are available in the country.Foreign Trade facilitates countries to export the goods which they have surplus and import goods which are short in supply. Flow of CurrencyHome Trade helps in the flow of currency from one place to another place in the country.Foreign Trade helps in exchange of currencies between two countries and helps increase of foreign exchange reserves. Advantage to PeopleHome Trade helps in increase the employment and specialization within the country.Foreign Trade helps in bringing the international division of labour and specialization. InsuranceThe goods of Home Trade don’t carry a compulsion to have the insurance for goods in transport.The goods which are sent to other countries by the foreign need to be insured compulsorily.