The international trade tells us the exchange of goods and services to and from international borders or another countries. International trade shows a big share in countries GDP so it’s important for many countries to carry out. America specializes in making computers, airplanes, food etc. and in return they get other stuffs such as banana, gunpowder, clocks etc. which they can’t produce in their own country. So in simple terms trade promote specialization which increases productivity. Trade help the consumer to broader their market for buying goods and services. Trade result in two action which are import and export. Import is where the good or services which are bought from the global market. Whereas export is where a good or services is sold on international market. INTERNATIONAL VS. DOMESTIC TRADE Trading can be done in both the international market or within a country’s boundaries. Trade is a trade. But there are still difference between an international trade and domestic trade: 1) The biggest advantage is that it broaden the choices for the consumer. If the people would be forces to consume what they can produce in their home country they would be poorer. Not much choices would be available to them and could not consume goods and services which they cannot produce by themselves. 2) Trading involves unlimited amount of goods and services to be imported and exported. International trading basically removes the international boundaries between countries. It allows freely flow of money. So countries would put barriers to trade such as tariff, quota etc. to make balance of payment in their favor. 3) It is important for the country to buy goods and services using that country’s own currency. In order to it they should buy the country’s currency from their own currency. If Pakistan imports car from japan they cannot buy them with Pakistani rupees. For them to make trade possible they should buy Japanese yen to make the trade move on. By this it means that to make trade possible the flow of currencies should have a smooth flow. REASONS FOR INTERNATIONAL TRADE IN GOODS AND SERVICES DIVERSITY IN NATURAL RESOURCES No country in the world is self-sufficient in terms of natural resources. Not a single country in this world have every natural recourses available on their land. Some country would be blessed with natural gas and some country would be oil rich like Middle East countries. DIFFERENCE IN TASTE There is difference of food taste in another countries even if they have the same technique for the production process. People might want to trade because of the better taste they find in others good. Like for example Pakistan would grow both mangoes and oranges and Brazil would do it too but the mangoes in Pakistan would be a better taste than in Brazil and oranges in Brazil would be better so both the countries would trade what they can produce better than the country to each other. This way both the countries can enjoy good fruits and it is a win win for both the countries. DIFFERENCES IN COST The reason for international trade would be that there would be differences in production of that good or services. Even though the country would be producing the identical good there would be differences in cost. One country would be experiencing a lower average cost than the other country so it is beneficial for that country to trade. This way the country would be paying less money to make that product. Some countries would be experiencing economies of scale because they would be only focusing on that good or service. Economies of scale would give technological heads start over another country so it would encourage the country to make trade from another country. If for example the labor cost in Pakistan is lower than the USA. So it is beneficial for United States so trade with Pakistan where labor cost is low. ABSOLUTE ADVANTAGE Famous economist Adam Smith showed us that nations should find out what they can produce more competently (which really means low-priced, improved and quicker), and then specialize in what they do best while trading with other nations who are also doing what they are