types of international trade

Crossing Borders: The Essential Guide to Understanding Types of International Trade

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There are three types of international trade: export trade, import trade, and entrepot trade. Each of these has its own set of advantages and must meet specific requirements depending on the merchandise and the country or location involved in the exchange.

What is international trade?

International trade involves the exchange of goods, capital, or services across borders between different countries. This happens because some regions have products or services that others don’t.

International trade is a major driver of a country’s economy and is much more complex than domestic trade. It involves considering factors like currency exchange rates, trade laws, government policies, market conditions, and the economy of each country.

To make these exchanges easier, various international economic organizations like the World Trade Organization (WTO) have been established.

What are the different types of international trade?

There are three different types of international trade: export trade, import trade, and entrepot trade. For example, when a country sells a product or service to another country, it’s called export trade. On the other hand, when a country buys a product offered by another country, it’s known as import trade.

The global market, as well as each country’s imports and exports, are related to the natural and technological resources available. Many nations purchase raw materials from other countries to manufacture products and sell them in the global market.

Other countries have chosen to acquire the technology and labor necessary to exploit their own natural resources and export finished products at a higher price.

Export trade

Export trade refers to the exchange of goods and services across international borders, where individuals or entities from one country purchase products made in another. This encompasses professional services traded between nations as well.

Entities, whether individuals, businesses, or countries, that sell their goods and services in this manner, are known as “exporters”, responsible for shipping the merchandise to their customers. Exported goods range from automobiles and industrial machinery to accessories and clothing.

To facilitate export trade, various services are necessary to streamline the process. One notable example is ocean freight, which is widely used internationally due to its cost-effectiveness and efficiency.

Import trade

This type of international trade is the polar opposite of the previous one. Import trade involves the purchase of goods or services from another country. The manufacturing or creation of the merchandise occurs in one territory, and another purchases it for entry there.

This transaction often occurs when the purchasing country lacks goods or services within its borders and must turn to another to meet its needs. In other cases, it’s because products originating from other countries are cheaper than those manufactured within the buying country. Additionally, many inputs are imported for the creation of new products that are subsequently exported to other locations.

Warehousing services are ideal for receiving imports and caring for the goods while they are dispatched to their delivery point. This way, they can be maintained without damage and delivered efficiently and promptly to the end customer.

Entrepot trade

The entrepot trade, also known as transshipment, involves importing products into a territory to later export them to another country without distributing them domestically

This trade is common between countries with raw materials but lacking in technology, and those with manufacturing capabilities; that’s why raw materials are imported, processed, and then re-exported to distribution destinations. 

Entrepot trade also fosters stronger commercial ties between countries and capitalizes on their respective strengths. Warehousing and transportation services play a crucial role in this process, providing storage for raw materials and finished products before delivery to their final destinations.

All countries around the globe employ the three types of international trade. The economy thrives on the exchange of services, products, and resources facilitated by the global trade network.

If your company is ready to take an international step, contact us to get a personalized quote. At EP Logistics, we want your company to grow internationally.