Trade Exchange … Communities revealing indicator

Trade Exchange can be defined as exchange of products between countries without the use of money, it is a simulation of a barter system. These products can be goods or services that are traded in international markets.

Trade exchange can be classified into main categories as follows:

•  “Bilateral trading” that takes place between two countries only 
• “Multilateral Trading” that take place between many countries 
•  “Regional Trading” that occurs between neighboring states. 
•  “ Domestic Trading” takes place between places that have surplus to others that have a shortage in the same product.
• “ International Trading” that takes place between different countries.

Benefits of  trade exchange

Trade exchange has many fruitful benefits that includes:

• “Reallocation of resources” which means the goods are redistributed according to where it is needed the most & will drive the best value from it, this facilitates commercial & economical operations.

 

• Exchanging makes all parties more satisfied.
• Exchanging trade reinforces economic & political relations among states.
• it works on developing & supporting the economy of the company as well as increasing the per capita income.
• it  controls the prices of the exchanged goods & minimize its fluctuations.
• it has a key target of reducing the unemployment between its nations.
• it facilitates projects funding.
• Trade exchange is utilized to fix cases of inflation & recession. 
• Trade exchange is considered as an indicator that measures the economic activity of a given country.

relation with international trade:- 

Trade was established by the inception & developing of human till it becomes a vital process in his life as exchanging goods & services between two or more parties.

 There is a direct relation between trade exchange & international trade, as the later has a crucial role in providing markets on a larger scale for exchanging goods & services due to three main reasons:

1. Diversification of resources allocation: 

what a country has a surplus in the other country may have a shortage in that same product, the thing that facilitates exchanging among them.

• Quality difference:

Due to the difference in facilities of manufacturing between countries; this stems in superiority of some countries over others so trade exchange take place to move these Superiorities to others in need places. 

• Different costs of production:

Countries tends to import goods & services from others that have lower production costs.

Foundations of trade exchange

Each country has a diversified needs than others which results in diversified demands of goods & services; so the global market has expanded to suit the needs of all countries, the foundations of the trade exchange may be divided into two main types:

1- The Abundancy & Scarcity of commodities:

Every country has different needs based on different requirements that may be divided into:

• Goods that the country produces on a large scale that cause a surplus which directs it to exporting, e.g. Egypt that exports onions, cotton & rice as it regarded from the first countries that export these products.
• Goods that a country produces in small quantities which directs it to importing the quantities that will compensate the shortage. E.g. Egypt imports wheat & meat to meet the needs of its market
• Goods that the country can’t afford due to the absence of its raw materials so the country tends to import these materials. E.g. Egypt import coffee, tea & tobacco.
• Goods that are produced in equilibrium with the domestic consumption & in that case that good don’t participate in the international trade.

2- International specialization:

There are some factors that complement each other to pursue the international specialization which divides into:

• Climate 

Climate conditions are considered a privilege in a country that is absent in another one. For instance, hot countries are famous for the production of bananas, spices & rubber while the temperate regions are famous for wheat & barley.Here comes the importance of trade and exchange to meet the shortage of both

• Diversification of natural endowments:

Where nature grants each country endowments that are unique to it, we may find agricultural crop production abundant in Canada, Australia, Egypt and America due to the presence of fertile soil for them, as the Gulf countries like Saudi Arabia and Kuwait are famous for producing oil and exporting it to the countries of the world.