Difference Between Internal and International Trade

Trade can be defined as an economic concept, which deals with the buying and selling of goods and services. Trade is being conducted between two or more parties (this can be individuals or between two or more business entities). There are basically two types of trade – Internal Trade and International Trade. Do you know the difference between the two? Also, what are these trades meant individually?

Therefore, we will discuss these two trades in this section. Also, the difference between the two will be crystal clear by us conceptually. Without further ado, let us dive into it. 

Difference Between Internal and International Trade

You might dream about owning a self-business, or you might have selected your career in the field of business, or simply you are interested in business. Either way, this term ‘trade’ will be coming into your study sooner or later. Trade is a major ingredient of a business. Now, you have to understand what is Internal trade and what is International trade, you must also know the difference between the two. 

Difference Between Domestic Trade and International Trade, Or Difference between National and International Trade

This means the exact same, that we are going to discuss the difference between - Internal Trade and International Trade. As you must know, Domestic Trade and National Trade, both are synonyms of Internal Trade.  

Another Trade

Thus, we present our content which will strengthen or update your knowledge on trade. Apart from Internal and International trade, we will also talk about another type of trade called ‘Foreign Trade’ and its difference with International Trade. 

Internal Trade Vs International Trade

Internal Trade

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Internal trade is the trade that takes place between two parties who are situated within the geographical boundaries of the same nation. This is also known as domestic trade or national trade.

International Trade 

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International Trade is the trade where there are two or more individuals present from two different countries. It can also involve one or two different countries that are involved in international trade. 

Now, let us look at the points of difference between - internal and international trade or difference between domestic trade and international trade:

Difference Between Internal Trade and International Trade

Why is a Separate Theory of Internal and International Trade Needed? 

Well, domestic and foreign trade are really one and the same.

There are, however, a number of things that make it necessary for the difference between internal trade and international trade. Let us discuss what are those:

1. Immobility of Factors of Production

Labour and capital cannot move freely from one country to another country, while this is easily done within the same country. Hence differences in the cost of production result in different theories of both. In regions within the same political boundaries, the people are distributed more or less according to the opportunities. Real wages and standard of living tend to seek a common platform, though they are not totally the same. As between nations, there are differences which continue to persist for the wages and check the population movements. Even the capital does not move freely from- one country to another. 

2. Different Currencies

We all know each country has a different currency. India for instance uses the rupee, in the US dollar is used, Germany uses the mark, Italy uses the lira, Spain uses the peso, Japan uses the yen. Thus, buying and selling between all these nations give rise to complications in the absence of international trade.

3. Restrictions on Trade

Trade between two or more different countries is never free. Very often there are restrictions that are imposed by the customs duties, by the exchange restrictions, they fix quotas or some other tariff barriers. For example, India imposes heavy duties on the import of motor cars, wines and liquors, and other sorts of luxury goods.

4. Ignorance

Knowledge of other countries cannot be as exact and updated as of one’s own country. There will be differences in culture, language, and religion which stand in the way of free communication that occurs between different countries. 

While, on the other hand, within the borders of a country, the labour and the capital can freely move about. These factors, too, make internal trade different from the international trade theory.

5. Transport and Insurance Costs

The cost of transport and insurance also check- free international trade. The greater the distance between these two countries, the greater will be the costs. While wars increase it even more.

Difference Between International and Foreign Trade

First of all, it has to be clarified that these two concepts refer to the exporting activity being an importer, which is to be carried outside our borders.

The difference between foreign trade and international trade refers to the trade which takes place between two different economic entities which are beyond the national borders or a country that carries out the commercial or the business operations with another country, however, the term ‘international trade’ gives a solid impression that the person is making reference to trading internationally. This activity is highlighted, this is to contemplate in a global way, that all the economic relations that exist between the different economic entities.

While the term ‘foreign trade’ refers to the commercial exchange of a country in which related to other countries is used. This is an economic activity that refers to the commercial exchange of the capital goods and services that a certain country carries out with the other countries of the world.