Trade is the buying and selling of goods and services between people, companies, or countries. It’s a central feature of our economy, and it determines what we can buy and where we can work. It affects everything from hormone levels in supermarket chicken to the pictures printed on cigarette packages to minimum wage laws around the world.
Trade developed along with civilization, starting in the earliest days of humanity when people started swapping items that they did not produce for those that they did have. Today, goods are transported across the globe in container ships and aeroplanes. Countries that want to sell their goods are known as exporters, while those who buy from others are known as importers. The concept of trading is based on the idea that everyone benefits when they exchange something they have for something they need.
Countries differ in endowments, such as climate and natural resources, so some may be able to produce certain goods more cheaply than others. This is the law of comparative advantage, a regular topic in introductory economics. However, many countries seek to protect local industries by imposing tariffs and other barriers to trade. This can lead to inefficient allocation of resources, and it makes consumers pay more for the goods they are buying.
Trade also benefits all economies by allowing them to share risk. For example, if one country has a severe drought, it can still get the food it needs from its trading partners. A country that does not trade, on the other hand, would be limited to what it can grow for itself.