Text IV: The Geographical Extend of Trade

The geographical extent of trade varies widely. In some cases, the buyers and sellers are from all parts of the world. Trade in such basic foods and raw materials as coffee, sugar, wheat, copper, oil, and rubber is international in scope. For example, the United States is a leading producer of wheat. It sells large amounts of wheat to India, Pakistan, Japan, the Netherlands, and many other countries.

Trade in other products may be conducted on a national, regional, or local basis. For example, the market for woolen goods in India is concentrated in the north of the country, where it snows in the winter.

In earlier days, local trade was much more important than it is today. This was partly because transportation facilities were limited and goods could not be moved on a large scale. Also, perishable food could not be preserved for very long. Perishable items had to be consumed near their place of production. But technological advances have removed these trade barriers. Trains, trucks, aeroplanes, and pipelines make it possible to move large quantities of goods easily and cheaply. Vegetables, meat, and others perishables can be refrigerated or frozen and shipped all over the world. Even flowers can be flown by aeroplanes to distant markets.

Also in earlier days, people’s tastes and preferences varied more from one locality to another. Today, mass advertising in magazines and newspapers and on radio and television persuades people of many different nationalities to use the same products. Millions of people drink the same kinds of soft drinks, use the same brands of detergents, drive the same makes of cars, and wear the same kinds of clothes and shoes. Thus, technological advances have created international markets, and international trade has taken the place of much purely local trade.

Trade in most non-Communist countries is carried out mainly by private persons and businesses. Government plays a less important role than do private individuals and groups, and is more important as a buyer than a seller. The sellers of goods range from giant motor car manufacturers, which sell millions of cars and trucks each year, to small shops, that sell such goods as bakery products or flowers.

Large amounts of goods and services are purchased by individual consumers, who buy such things as dresses, transistor radios, food, and haircuts. Businesses buy the raw materials and capital equipment they need for production from other businesses. Governments also buy many goods and services, for example, the services of members of the armed forces.

The way in which trade is organized and carried on in a particular country is that country’s economic system. In most non-Communist countries this system is often called capitalism, free enterprise, or private enterprise. Trade – buying and selling goods and services in the market – is an essential part of a free economy. In the free market, consumers help determine prices and thus what they want indicates to producers what ought to be produced. In China and other countries with centrally planned economies, government planners make the basic economic decisions both about what will be produced and about the prices of the products.