Basis of International Trade

This topic tries to answer a simple question:
👉 Why do countries trade with each other at all?

Think of countries as people in a big village. One person has rice, another has milk, and a third has wool. Naturally, they will exchange. This same logic of interdependence operates globally—but on a much more complex level, influenced by physical geography, resources, culture, and economic development.

Let’s now explore these bases systematically:

Unequal Distribution of Natural Resources

Nature hasn’t distributed everything equally. Some places have oil, others have gold, and some grow rice, while others grow dates.

• Why the inequality?
  Because of variations in geology, relief, soil, and climate.

This unequal distribution compels countries to trade. A country imports what it lacks and exports what it has in abundance.

Geological Structure

This refers to the geological makeup of the Earth’s crust in a region, which determines:

• Type and quantity of minerals available.
• For example:
  • The Deccan Plateau in India is rich in basaltic rock and thus has manganese and iron.
  • South Africa is rich in gold and platinum, due to its unique geology.

So, geology directly influences trade by shaping the mineral resource base of a nation.

Topographical Differences

• Relief and landform differences lead to variation in:
  • Agricultural patterns (e.g. rice in floodplains, tea in hills)
  • Animal rearing (e.g. yak in Tibet, camel in Sahara)
• Lowlands → good for agriculture and trade hubs.
• Mountains → not agriculturally productive but great for tourism and certain niche products (like Himachali wool).

Thus, relief influences trade patterns through agricultural diversity and tourism.

Mineral Resources

• Minerals like iron ore, coal, bauxite, and oil are not evenly distributed.
• Countries rich in minerals (e.g. Australia, Saudi Arabia) often become export hubs.
• These minerals also support industrial growth, which further enhances manufactured goods trade.

So, minerals act as both a raw material and a source of trade surplus.

Climate

Climate defines what can grow or survive in a region.

• Cold areas → Wool production (e.g. New Zealand, Kashmir)
• Tropical regions → Banana, rubber, cocoa (e.g. Ghana, Brazil, Kerala)

Hence, climatic diversity ensures product diversity, which becomes the foundation of complementary trade.

Population Factors

Let’s break this into three sub-parts:

a) Size of Population

• A large population → high domestic demand.
  • Example: India and China have large internal markets.
• These countries consume most of their production, leaving little for export.

b) Standard of Living

• Richer populations → demand for better quality imports.
• Poorer populations → limited ability to afford imported goods.
• Hence, trade demand is directly linked to per capita income.

c) Diversity and Distribution

• If the population is diverse and well-spread, it increases the demand for various goods.
  • Example: Urban areas may demand gadgets, while rural areas need seeds and tractors.

Cultural Factors

Culture influences what is produced and what is valued in trade.

• Certain countries develop unique, culturally rich goods:
  • China: Porcelain, brocade
  • Iran: Carpets
  • Indonesia: Batik
  • North Africa: Leatherwork

These become valuable export items in the international market, even if they’re not industrial giants.

Stage of Economic Development

A country’s level of development determines what it trades:

• Agricultural countries → Export agro-products, import machinery.
• Industrialised countries → Export manufactured goods, import raw materials.

This is part of the classical model of trade, where there is a core-periphery relationship in economic geography.

Extent of Foreign Investment

This is often an overlooked but powerful factor.

• Developing countries lack capital to tap into their own resources.
  • For example: Oil in Nigeria, copper in Zambia.
• Foreign Direct Investment (FDI) allows industrialised nations to:
  • Invest in mining, drilling, plantations.
  • Export resources and create markets for their finished goods.

This creates a circular flow of trade, where:

1. Investment brings production,
2. Production leads to exports, and
3. Exports stimulate further trade.

Transport and Connectivity

Trade is not possible without transport.

• In ancient times, only high-value items like silk or spices were traded due to lack of efficient transport.
• But now, with railways, ships, and planes, even perishable goods like fish and flowers are traded across continents.
• Refrigeration and preservation technologies have further expanded trade networks.

Thus, the expansion of transport infrastructure leads to spatial expansion of trade.