Difference between Internal trade and International trade

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In simple words, Trade is a basic economic concept which involving the buying and selling of goods or services from one person to another entity. In other words, Trade involves the transfer of goods and services from one person to another. So friends, in today’s article we are going to know about the Difference between Internal trade and International trade. So let’s discuss in details.

Internal and International trade

Internal Trade Meaning – Inter regional trade or internal trade refers to the transaction of goods and services between two regions within the geographical boundary of a country. Some example of internal trade – Trade between Assam and Bihar, Trade between Dhubri and Dibrugarh.

International Trade Meaning – International trade means transaction of goods and services among different countries of the world. Example of international trade – Trade between India and USA, India and Japan, etc.

Difference between Internal trade and International trade

The classical economists make a difference between internal and international trade on the following grounds –

Internal/Inter regional Trade International Trade
• Factors of production are freely mobile within the country. • But the factors of production are not freely mobile in different countries of the world.
• Within a country one currency is used for payments. • But different currencies are using separate monetary system and currency units. Hence it creates payment problem.
• Within one country internal trade is free and unrestricted. • But in case of international trade several restrictions are imposed by the trading country.
• Within one country the political and economic system is unique. Hence it does not create any problem. • But different countries follow different political and economic setup. Hence, it creates different trade problems.
• The tastes and performance of the internal market are same. • But internationals markets are separated by differences in tastes and performances. Thus the style of trade is different.
• Internal trade does not face the problem of BOPs (Balance of Payments) crisis and its adjustments. • But in case of international trade the trading countries are facing the problem of favourable and unfavourable BOPs.
• Inter regional trade or internal trade refers to the transaction of goods and services between two regions within the geographical boundary of a country. • International trade means transaction of goods and services among different countries of the world.
• Example of internal trade – Trade between Assam and Bihar, Trade between Dhubri and Dibrugarh. • Example of international trade – Trade between India and USA, India and Japan, etc.

Due to above difference between internal trade and international trade, the classical economists are favoured for a separate theory of international trade. But the modern economists have regarded international and interregional trade as  similar and are of the view that there is no need for a separate theory of international trade. The reasons are mentioned below –

• The prices of domestically or internationally trade goods are determined in the same way through the equality of demand and supply forces.

• Both types of trade occur due to division of labour and specialization.

• Participants in both internal and international trade aims at maximizing their gain.

• According to modern economist, today there is some mobility of factors internationally.

Conclusion

So friends, this was the concept of Difference between Internal trade and International trade. Hope you get the full details about it and hope you like this article.

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