Global trading, also known as International trading is all about exchanging goods and services among different countries. Global trading existed since 1000s of years but during those days, goods were not exchanged for economical benefits. Countries use to exchange items they are capable of producing in abundance. However, there were lots of limitations and barriers. During 15th and 16th centuries, Europeans discovered new sea routs to different countries on earth. This in turn greatly evolved the concept of global trading.
New trading policies were created and large number of countries started exporting and importing goods. The strong tie ups between countries, movement of people across the globe further expanded the global trading concepts in the following centuries. As a result, the 20th century witnessed Globalization, a global network of economic systems. This was the time when the new forms of transportation and telecommunication were invented to compress the space between the countries.
Here is an example to understand global trading better. Opportunity cost is a common term used in Global trading. This term refers to the production cost of a commodity. For example: – Portugal produces more wine per-man-hour than England. This means the opportunity cost of wine in Portugal is lesser than England. On the other side, the opportunity cost for the production of wheat in England is several times lesser than Portugal. In this scenario, Portugal exports wine to England and England exports wheat to Portugal. The concept of global trading allows the countries to focus on producing goods with low opportunity cost, which can be sold to other countries for the betterment of economy. Countries can focus on what they are good at. Globalization broke the boundaries between the countries and turned the whole world into one big market.
In our later posts, we will discuss more about taking your business to an International platform.