Everything you need to know about International Trade

International Trade is one of the pillars of a country’s economy. Through it, it’s possible to establish international relations, fostering closer ties between countries and opening up to a more extensive market that goes beyond territorial borders. In this article, we’ve selected relevant information and tips about international trade, the main types of operations, ports, and handled products, as well as information about the national context. Continue reading to find out more!

What is International Trade?

International Trade is the set of operations involving the exchange of services and goods between different countries. It can involve manufactured materials, services, commodities, labor, and even the movement of capital.

Therefore, it represents the purchase of goods or products between buyers and sellers located in different countries. In international trade operations, financial, tax, commercial, administrative and customs issues are involved. It is a very complex process that involves export and import taxes, as well as customs charges.

Operations are subject to a series of rules defined by international bodies — this is the case of the World Trade Organization (WTO). In addition, these operations are governed by bilateral agreements, in which the governments of the nations involved participate. In addition, it is also necessary to comply with the domestic legislation of each country — what we usually call “foreign trade”.

Difference between international trade and foreign trade

When talking about international trade, it is important to know that there is a conceptual difference between it and foreign trade. Many people confuse the two terms, believing them to be synonyms.

International trade is linked to international rules applied equally to all countries. It contemplates economic, political and cultural exchange and is regulated by the WTO and the International Chamber of Commerce (ICC).

Foreign trade, in turn, refers to a country’s internal rules applied to international operations. It covers tax, customs, commercial, administrative and financial issues. In Brazil, it is regulated by the Brazilian Internal Revenue Service.

What are the types of operations in international trade?

When we talk about International Trade, its operations are divided into two types: exports and imports. While the term “export” refers to the exit of products from a country through their sale to the foreign market, the term “import” refers to the entry of foreign products into the country through their acquisition/purchase.

These concepts are basic and are fully integrated into the routine of those who operate with logistics and international trade. As important as knowing them and their differences is to know the rules, taxes and good practices linked to their operation.

To ensure that operations occur efficiently and safely, many companies opt to hire specialized professionals, such as Wilson Sons, for example, which operates in integrated port logistics operations.

What are the most imported and exported products today?

Brazil is a country that stands out internationally in the face of exports and imports, in addition to relevant commercial partnerships. Considering this, we’ve selected relevant information about the main products and trading partners, according to the Consolidated Trade Balance Data report published by the Foreign Trade Secretariat and Ministry of Economy, updated in July 2023:

Exports

In the export segment, the products with the highest volume of operations are agricultural items, extractive industry and manufacturing industry.

In July 2023 there were some total drops in exports compared to the previous months, check out the numbers:

• * Agriculture — US$6.71 billion, down -0.1%;
• * Extractive Industry — US$6.45 billion, down -2.6%; and,
• * Manufacturing Industry — $15.61 billion, down 5.0%.

Although there has been a retraction in exports, in the total accumulated of the year the market continues to grow. Check out what the official publication of the Ministry of Economy says:

In the cumulative period from January to July 2023, compared to the same period of the previous year, the results by sectors were as follows: a growth of 5.7% in Agriculture, totaling $49.70 billion; a decrease of -4.2% in Extractive Industry, reaching $41.41 billion; and finally, a decrease of -1.0% in Manufacturing Industry, which reached $101.85 billion. The association of these results led to an increase in total exports.

In this context, there was an increase in sales of the following products:

• * live animals, not including fish or crustaceans;
• * unground corn;
• * soybean;
• * crude minerals;
• * copper ores and concentrates thereof;
• * precious metal ores and concentrates thereof;
• * sugars and molasses;
• * soybean meal and other animal feed;
• * meat meals and other animals; and,
• * cellulose

Imports

With regard to imports, the data updated in July 2023 also indicate a drop in operations:

• * Agriculture — US$0.36 billion, down -24.9%;
• * Extractive Industry — US$1.44 billion, down -4.1%; and,
• * Manufacturing — US$18.09 billion, down -18.9%.

Year-to-date, import results were down and down. Check out what the official publication of the Ministry of Economy says:

In the cumulative period from January to July 2023, compared to the same period of the previous year, the results by sectors were as follows: a decrease of -19.5% in Agriculture, totaling $2.66 billion; a contraction of -23.6% in Extractive Industry, reaching $10.13 billion; and a decrease of -7.0% in Manufacturing Industry, which reached $126.80 billion. The combination of these results led to a drop in total imports.

Main trading partners

In July 2023, Brazil had Argentina, China, Hong Kong and Macao as its main trading partners. There was a drop in operations maintained with the United States and the European Union.

Argentina

In July 2023, there was a 16.4% increase in exports to Argentina, totaling US$1.60 billion. Imports fell by -2.5%, totaling US$1.00 billion. According to the trade balance data, year-to-date:

In the accumulated period of January/July 2023, in relation to the same period of the previous year, sales to Argentina grew 24.5% and reached US$11.03 billion. Imports fell -3.5% to US$6.93 billion. Thus, in this period, the trade balance for this country presented a positive balance of US$4.10 billion and the trade current expanded by 12.0% totaling US$17.96 billion.

China, Hong Kong and Macao

In July 2023, there was a 12.9% growth in exports to China, Hong Kong and Macao, totaling US$9.02 billion. Regarding imports, there was a drop of -20.7%, totaling US$4.26 billion. According to the trade balance data, year-to-date:

In the January/July 2023 period, in relation to the same period of the previous year, sales to China, Hong Kong and Macao grew 6.8% and reached US$59.52 billion. Imports fell -10.7% to $30.16 billion. Consequently, in this period, the trade balance presented a surplus of US$29.36 billion and the trade current expanded by 0.2%, totaling US$89.67 billion.

United States of America

Although there was a decrease of -2.5% in exports and -23.0% in imports, considering the accumulated of the year, the United States is still considered a relevant trading partner of Brazil

European Union

The same applies to the European Union, there was a drop of -11.3% in exports. However, in the case of imports, there was a growth of 12.2% year-to-date (January to July 2023).

In the cumulative period from January to July 2023, compared to the same period of the previous year, exports to the European Union fell by -11.3% and reached $26.26 billion. Imports grew 12.2% and totaled US$27.61 billion. Consequently, in this period, the trade balance with this trading block presented a deficit of US$ -1.35 billion and the trade current decreased by -0.6% to US$53.87 billion.

What is the importance of international trade?

Some nations have an abundance of specialized labor in a specific segment, while other countries have deficiencies.

Other areas of the Earth have an abundance of natural resources or offer better climate and terrain conditions for the cultivation of some species. And other regions, in turn, do not have these characteristics.

It can be seen, therefore, that no country is self-sufficient in all resources. Thus, a country resorts to International Trade to export services and goods it produces while importing items whose domestic production is precarious or does not exist.

In practical terms, international trade brings several benefits to society such as: growth in per capita income, increased purchasing power, and more job opportunities within the country.

International business increases new business opportunities for companies. Thus, they start to specialize, improve their production and the distribution flow of their products.

This increases its production, reduces production costs and allows it to offer the market products with better cost-benefit. Consequently, the population’s purchasing power increases, businesses can increase their sales, the country collects more revenue, and the combination of these changes contributes to strengthening the economy.

What is the impact of international trade on the economy?

The impact on the economy is evident, due to different aspects, especially the possibility of meeting demands from countries that do not have sufficient resources. Different nations trade goods and services with each other, creating ties from the economy and opening new opportunities for companies.

International Trade reduces the risks of activities and allows the company to continue trading even if economic crises occur in the country.

The trade balance is the best tool to monitor the performance of International Trade. It is an indicator that records exports/imports of services and goods. In fact, it’s the difference between exports and imports.

If the balance is positive, it means that the nation is making more exports than imports. If the balance is negative, it means the opposite, that is, imports represent a higher value than exports.

What are the regulatory institutions of International Trade?

Brazil’s International Trade is famous worldwide for exporting items such as oil, soybeans, pulp and iron ore.

There are also large companies listed on the Stock Exchange focused on the export of these goods. One of the largest oil exporters on the entire Earth is Petrobras.

The importance of International Trade in the economy is also evident in the existence of different international institutions that operate in the trade sector. Let’s look at the main ones:

• * ICC (International Chamber of Commerce): this is a non-governmental body that emerged in 1919 formed by the chambers of commerce;
• * IMF (International Monetary Fund): it was created in 1994, with the purpose of ensuring financial stability around the world, helping nations facing economic crises through loans;
• * WTO (World Trade Organization): in 1948, the GATT (General Agreement on Tariffs and Trade) appeared with the purpose of motivating the economic development of the world through negotiations of agreements between nations, reducing trade obstacles;
• * World Bank: Emerged during the Second World War to aid in the reconstruction of European countries affected by the conflict; after this restructuring, the World Bank prioritized assistance for natural disasters, humanitarian aid, as well as other needs resulting from conflicts, with the main focus of reducing poverty in developing nations.

How does the maritime modal work in International Trade?

The maritime modal is the most used when it comes to International Trade. Although the delivery time is longer than the air modal, the costs are lower.

Ports are of great relevance for the loading and unloading of goods worldwide. In our country, we have 76 terminals inland (referring to rivers and lakes): 18 in the South Region, 52 in the North Region, 6 in the Midwest Region.

When we add these ports to the maritime facilities for long-haul navigation, there are, in total, 175 port facilities in Brazil, which are responsible for 95% of our imports and exports. Of all Brazilian ports, Santos is the most important.

There are also dry ports, which are already gaining a lot of space. A dry port consists of a customs enclosure for public use, being a secondary region — that is, it receives the products imported or to be exported. The regime is common or special, but the dry port always operates in areas delimited by the Federal Revenue Service.

The products, after passing through the dry port, arrive (at the sea port or airport) ready for shipment. In this way, it is possible to greatly reduce bureaucracy and the waiting period in primary zones.

In this article, we talk about the main points of International Trade. You confirmed how important it is for the development of countries, whether developed or developing. Imports and exports open opportunities for rapprochement between different nations, fostering not only a more balanced economy, but cultural sharing and knowledge exchange.

Did you like this content on international trade? Take the opportunity to check out this article on port activity in Brazil and deepen your knowledge on the subject.