Posted in Finance, Accounting and Economics Terms, Total Reads: 1014
Trade, also known as commerce, is defined as the ownership transfer of goods and services from one entity or person to another. The buyer has to give money or money’s worth to the seller in exchange of the goods or services. The place where open trade occurs is called as market.
The concept of trade started because of the taking up of specialized fields and division of labor by mankind as we moved towards civilization. A single person could not produce/manufacture everything required by him hence people started exchanging things, a system known as barter. Now such trades occur at scale as huge as in-between countries. World Trade Organization had organized Doha rounds so as to lower the trade barriers between different countries.
Broad classification of trade:
Home / internal trade – within a country
Wholesale trade – bulk trade between manufacturer and wholesaler
Retail trade – low quantity trade between wholesaler and consumers
Foreign / external trade – between countries
Import trade – buying products made in foreign coutry
Export trade – selling home manufactured products to foreign country
Extrepot trade - selling products obtained through imports to some other foreign country after some processing
There are trade barriers by the countries to keep the economy and exchange rates in check. Trade sanctions are imposed against a country to penalize it.