Differences and Similarities between Internal Trade and International Trade

Internal trade refers to the exchange, buying, and selling of goods and services within the borders of a single country.

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Internal trade refers to the exchange, buying, and selling of goods and services within the borders of a single country. It encompasses trade activities that occur between regions, cities, or localities within a nation. Internal trade is also known as home trade or domestic trade.

International trade, on the other hand, refers to the exchange, buying, and selling of goods and services between two or more countries. It is also known as foreign trade.

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Differences Between International Trade and Internal Trade

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AspectInternational TradeInternal Trade
CurrenciesInvolves two or more currencies.Involves only one currency.
Geographic ScopeInvolves two or more countries.Takes place within a single country.
Goods OriginForeign-made goods and services are involved.Goods and services are mainly locally made.
Boundary CrossingGoods and services cross national boundaries.Goods and services do not cross boundaries.
CostTheoretically, it can be costly due to customs, tariffs, etc.It is usually cheaper due to domestic regulations.
Foreign Exchange EarningsEarns foreign exchange.No foreign exchange earnings.
RevenueMore revenue is realized through international trade.Less revenue is earned from internal trade.
Mobility of FactorsLabour and capital are less mobile.Labour and capital are more mobile.
Trade Balance IssuesGives rise to balance of trade and payment problems.Such problems are minimal in internal trade.
Cultural ChallengesClimate, culture, language differences, etc., can create issues.Fewer cultural challenges are encountered.

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Similarities Between International Trade and Internal Trade

  1. Medium of Exchange: Both international and internal trade transactions involve the use of a medium of exchange, typically currency.
  2. Trade Terminology: Both forms are commonly referred to as “trade” and encompass the exchange of goods and services.
  3. Inequitable Distribution: Both types of trade arise from the inequitable distribution of natural resources and production costs.
  4. Costs and Middlemen: Both types of trade incur costs related to auxiliary services, such as transportation and storage. Middlemen play a role in both scenarios.
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