Trade is the buying and selling of goods and services between one region and another, within the same country or between one country and another. The former is known as internal trade while the latter is called international trade.
Types of Trade
International Trade
This trade is divided into two groups. They are:
- Import Trade: This trade involves the buying of goods and services from another country into one’s own country.
- Export Trade: This is the selling of goods and services produced in one’s own country to another country.
Reasons for Trade
Countries of the world are involved in trade for the following reasons.
- Differences in Natural Resources: The presence of natural resources in some regions and the absence of the resources in other regions have created opportunities for trade among nations.
- Differences in Climate: Different climatic conditions favour the growth of different crops for exports. The mediterrean climate, for instance, favours the growth of fruits including grapes, oranges, apples etc. While the tropical climate favours the mineral deposits.
- Differences in Technology: The higher the differences in the level of technology, the greater the volume of trade between two countries. The low level of technology difference between African countries and the industrialized western countries explains the existing high volume of trade between the two continents.
- Differences in Agricultural Products: A wide difference in the production of agricultural goods among regions promotes large volume trade.
- Differences in the import Duties: Higher import duties imposed on imported goods may discourage trade between two countries.
- Differences in the prices of Goods: The higher the differences between the prices of goods, the greater the volume of trade between two countries.
- Colonial Ties: Franco-phone countries trend to have Favourable trade with other Franco-phone countries while Anglo-phone countries also have higher volume of trade among themselves because of the existing colonial ties, as for example, trade between Nigeria and Britain.
- Political Consideration: The trade between one country and another may be based on bilateral relations or political considerations. For instance, the imposition if political and economic sanctions on a country may affect the volume of trade between one country and another.
- Earning of Foreign Exchange: The need to earn foreign exchange help promote trade between nations.
Reasons for High volume of Trade between Nigeria and Developed Countries
The reasons for high volume of trade between Nigeria and developed countries like Japan, Britain, U.S.A and China are as follows:
- Dissimilarity of Products
- High level of technology
- High levels of Savings
- Preference for imported goods
- Absence of Trade Barrier
- Differences in import duties
Factors which limit international Trade
- Strained international Relations: Economic sanctions as a result of strained diplomatic relations can lead to non-importation or exportation of goods.
- Low demand for Products: The low demand for products may limit the volume of trade between two countries. The aim of trade is to maximize profit. Low demand for products implies inadequate market for the products
- Political Instability: Political instability or civil strife and other social vices, including hostage taking, hijacking, etc, can limit the volume of trade between two countries.
- Inadequate foreign Exchange: Inadequate foreign exchange can seriously affect the volume of trade between two countries.
- Language Barrier: Differences in language between countries hinder the operation of international trade.
- Differences in Currency: Differences in Currency among countries make the availability of foreign exchange very problematic. The foreign exchange rate differs from one country to another. The existence of parallel foreign exchange market in some countries has further compounded the currency situation.
WORLD’S MAJOR SHIPPING ROUTES
The world’s major ocean shipping routes are;
- The North Atlantic route: This trade route links two most populous and heavily industrialized parts of the world; that is, Western Europe and Easter parts of North America. It is the busiest shipping route in the world.
- The Panama Canal route: This is a domestic route between the east and west coasts of the U.S.A. the Panama Canal route was opened in 1913 between the Atlantic and the Pacific oceans. It serves the Caribbean countries. Some of these countries are Cuba, Jamaica, Venezuela, Columbia, Ecuador, Chile and Peru.
- Trans-Pacific routes: it is the longest route in the world, connecting the western side of North America and East Asia. The route serves the following countries Japan, China, Korea, Australia and New Zealand. The major seaports are Sydney, Auckland, Manila, Yohohama, Vancouver and San Francisco.
- The Cape route: This sea route was discovered by Vasco Da Gama in 1498 during his voyage to India. It was a very famous route that linked Europe, America with the Middle East through South Africa. The popularity of the route was greatly reduced when the Suez Canal was constructed and opened in 1869. The main sea port along this sea route is Cape Town in South Africa.
- The South Atlantic route: the route links South America, Europe, West Africa and Western Europe. The major seaports along this sea route are London and Rotterdam in Europe, Buenos Aires in Argentina, Rio de Janeiro in Brazil, Dakar and Lagos in Nigeria. The main items of trade in the route include manufactured goods from Europe and agricultural produce such as coffee, wheat, meat, and dairy products from Brazil and Argentina, Groundnuts, Crude oil, Palm produces from West Africa.
See also
ECONOMIC CO-OPERATION OF WEST AFRICA