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Trade

International trade

A ship transporting crude oilA ship transporting crude oilInternational trade is the exchange of money, goods and services across international borders. Exports are goods and services that are sent out for sale to another country. Imports are goods and services that are bought from another country. Trade between nations has been in existence for around 5000 years. It probably began between the kingdoms of Egypt and the Middle East. Today, a large percentage of most countries’ gross domestic product (the value of all goods and services produced within a country) is exported. The goods that are most traded between nations are fuels, including oil and gas, followed by electronic equipment and machinery. The USA is the country that exports the greatest amount of goods and services around the world.



A chart showing exchange ratesA chart showing exchange rates

Exchange rates

Exchange rates make it possible for items to be traded between different currency zones, and for people from one currency zone to buy things in another. Exchange rates are the prices at which currencies can be exchanged with one another. Constantly changing, they are determined by the foreign exchange market, a network of financial centres around the world (such as in London, New York and Tokyo) where buyers and sellers trade in currencies. The currencies of countries with stability and good economic growth—that is, plenty of goods produced and bought, and high employment—will tend to sell for a higher price.

 

The Chicago Board of Trade, a commodity marketThe Chicago Board of Trade, a commodity market

Financial markets

A financial market is where people and organizations can trade in money, commodities (such as wheat or gold) and financial products (such as shares in companies). The prices are determined by supply and demand—the more people want to buy something (or the scarcer its supply), the more its price goes up. Financial markets work like any other market: they bring together sellers and buyers. Today, transactions usually take place over the internet, and most are "virtual": money or goods change hands only on a computer screen.

New York Stock Exchange, Wall StreetNew York Stock Exchange, Wall StreetSome key types of markets include commodity markets (trading in commodities such as coffee), stock markets (shares, or “stock”, in companies), foreign exchange markets (currencies) and money markets (debts and capital). Stock exchanges are places where traders buy and sell on the stock market. The largest and most important is the New York Stock Exchange on Wall Street in New York City. When people refer to "Wall Street", they are talking about the US financial markets as a whole.

 

Fair trade

Fairtrade coffee beans, NicaraguaFairtrade coffee beans, NicaraguaFair trade is a movement led by certain organizations and individuals that helps producers in developing nations obtain fair prices for their exports. In the past, prices of exports from developing countries—particularly tea, coffee, sugar, cocoa, bananas and handicrafts—have been kept low by importers (buyers), fully aware that the exporters were desperate to sell. Low prices mean low pay for farmers, who are then forced to turn to bad farming practices such as cutting down rainforest to gain more farmland in order to increase production.

A café selling only fairtrade drinksA café selling only fairtrade drinksOfficially recognized fair trade products, such as those with the Fairtrade International logo, have a higher, “fairer” price than competing products, and have been grown on farms that use sustainable methods: the farmland can be used for growing crops every year—unlike land previously covered by rainforest.





Consultant:
 Lloyd Jenkins
 

See also in History

The most commonly traded commodity on the international commodities markets is crude oil. The second most traded commodity is coffee.

The domestication of the camel in Arabia in around 3000 BC was a key development in the history of trade: it allowed Arabian merchants to transport goods for greater distances overland.

The most traded currencies on the international currency exchanges are, in descending order, the US dollar, the euro, the Japanese yen, the UK pound and the Australian dollar.

Sales of fairtrade goods increase every year. In 2000, they were worth £180 million (US$300 million), in 2012 they were £5.4 billion (US$9 billion)—and by 2025, it is predicted they will be worth up to £15 billion (US$25 billion).

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