Distinguish between foreign trade and domestic trade?

Trade means exchange of goods. Well, domestic and foreign trade are really one and the same. They both imply exchange of goods between persons. They both aim at achieving increased production through division of labour. There are, however, a number of things which make a difference between foreign trade and domestic trade and necessitate a separate theory of interna¬tional trade. Immobility of Factors of Production: Labour and capital do not move freely from one country to another as they do within the same country. Different Currencies: Each country has a different currency. India for instance, has the rupee, the U.S.A. the dollar, Germany the mark, Italy the lira, Spain the peso, Japan the yen, and so on. Hence, buying and selling between nations give rise to complications absent in internal trade. Restrictions on Trade: Trade between different countries is not free. Very often there are restrictions imposed by custom duties, exchange restric-tions, fixed quotas or other tariff barriers. For example, our own country has imposed heavy duties on import of motor cars, wines and liquors and other luxury goods. Ignorance: Knowledge of other countries cannot be as exact and full as of one’s own country. Differences in culture, language and religion stand in the way of free communication between different countries. On the other hand, within the borders of a country, labour and capital freely move about. These factors, too, make internal trade different from international trade. (v) Transport and Insurance Costs: Then costs of transport and insurance also check- free international trade. The greater the distance between the two countries, the greater are these costs. Wars increase them still more. Conclusion: Thus, comparative immobility of labour and capital, restric¬tions on trade, transport and other costs, ignorance, and differences in language, customs, laws and currency systems make international trade different from domestic trade and necessitate a separate theory of international trade. read less

Foreign trade is the exchange of goods & services across the international borders whereas domestic trade is the exchange of goods & services within boundaries of a country. There are broader markets for foreign trade but for domestic trade, the market is limited. The movement of goods is quiet restricted in foreign trade than domestic trade due to tariff, embargo and other trade barriers. You may just have to pay sales tax in domestic trade. read less

What is domestic trade? Domestic trade can also be called an internal trade. A domestic trade is a trade which is within the borders of a given country. For example, all trading activities that go on within your country are referred to as domestic trade. What is international trade? International trade on the other hand is any business transaction that occurs between two or more countries. All businesses that are transacted across the boundaries of your country fall under international trade. For example, if the United States imports cocoa from Ghana, then we refer to that as an international trade. International trade can either occur between one country and another country or between people located in different countries. Another name for international trade is foreign trade. More on the major differences between domestic trade and international trade Domestic trade always takes place within the borders of a given country, while international trade always goes beyond the borders of a given country. Domestic trade can never involve more than one country, but international trade always involves two or more countries. Domestic trade, to a large extent involves the use of mainly local currency in trading, whereas international trade involves the use of foreign currencies. The U.S. dollar is the standard currency used in international trade. Domestic trade is free off restriction, so long as it is a legal commodity being traded. Legal and wholesome commodities dealt with in domestic trade can move around the country without facing any forms of restrictions such as embargoes and quotas. But this is not the case for international trade. In international trade, certain goods, though legal, can be subjected to certain restrictions such as embargoes and quotas. There are so many reasons why sometimes commodities dealt with in international trade face certain restrictions. Some of these reasons include the following, in order to protect infant industries within a country, in order to raise the level of employment within a country, in order to discourage the importation of legal but harmful goods such as tobacco into a country, in order to ensure self-sufficiency, etc. Domestic trade is not subject to being controlled by external bodies, but this isn’t the same for international trade. International trade is controlled by certain external bodies to which a country is a member. A very good example of an external body that controls trade all over the world is the World Trade Organization. International trade generally involves very long distances, but this is normally not the case with domestic trade. Take for example a trade between South Africa and Sweden or between New Zealand and Egypt. These trades certainly involve very lengthy distances to be covered. But a trade between any two points in South Africa or Sweden can never be that lengthy. read less