The Trade Of International Trade - 1538 Words

International trade is the exchange of capital, goods in general, and services across other countries or territory provided if the government impose free trade. (Grosse; Behrman, 1992) Free trade means that the government do not intervene on what its citizen can buy, produce or sell internationally. International trade first began in a barter system which is followed by mercantilism in the early 16th and 17th century we’re mercantilism trade is practiced and this is what nation nowadays still view international business as. Mercantilism is when countries trying to maximize export through the use of subsidies and minimize import through tariffs and quotas. This theory is used as country hope to get a trade surplus. For instance, according to PT Data Consult Inc, Indonesia has been having a trade surplus within its Asian region except Brunei in 2001. It is because of Indonesia has a lack of crude in the oil refineries which results in a trade deficit between Brunei. Other than that, Indonesia has enjoyed the benefits of exporting commodities like rubber, textiles and etc. (PT Data Consult Inc, 2003) Every country wants to have a trade surplus as it will help the country’s economy by generating more cash into the country and reduce the deficit. However, International business is not just about having a surplus but to be effective as well. In order to be effective in doing international business, Adam Smith’s absolute advantage theory needs to be taken into account as well.Show MoreRelatedTrade Barriers Of International Trade1659 Words   |  7 PagesIntroduction Trade barriers refer to the measures and policies that public authorities implement with the objective of controlling imports and exports to protect goods and services that are produced locally as well as regulating their quality on the market. They also tend to affect both the free flow of international trade and investments. 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