Characteristics of Domestic and International Trade

Characteristics of Domestic and International Trade – The process of exchanging goods and services from one region to another is called trade. The existence of differences in needs and resources owned led to social activities in the form of trade.

Trade can also be interpreted as an economic activity that connects producers and consumers. Trading is believed to be a promising business and generates a lot of profit. In the world of trade, there are terms domestic trade and international trade.

Economic activity of buying and selling between producers and consumers aims to gain profits in meeting common needs. The characteristics of trade in general, namely, the existence of means of payment in the form of money, the existence of sellers and buyers, an agreement between the seller and the buyer, obtaining profits or profits from the goods sold, and the process of production and distribution of goods before they fall into the hands of consumers.

Domestic trade and international trade have main characteristics. Before entering into a discussion of the characteristics of domestic trade and international trade, let’s look at the following reviews.

Domestic Trade

As stated in Law Number 7 of 2014, the definition of domestic trade is a process of buying and selling goods and services with a trading system that only covers the territory of the Republic of Indonesia and does not include foreign trade.

Foreign trade is also often interpreted as trading activities carried out around the territory of Indonesia, both from one region to another. Domestic trade is tasked with carrying out government affairs in the trade sector, starting from basic goods, important goods, business development, trade facilities, promotion and cooperation.

Indonesia’s domestic trade conditions have progressed well in recent years. The progress made can help reduce the poverty rate and increase employment development in the official sector.

The condition of the motherland can be said to be more fortunate in passing through the world financial crisis relatively smoothly when compared to neighboring countries. This success opens opportunities for Indonesia to increase domestic sales.

Domestic trade requires that the government establish several policy and control roles. These policies and controls lead to increased distribution efficiency and effectiveness. Then the government took the role of improving the business climate and business certainty.

The existence of domestic trade also requires the government to integrate and expand the domestic market. In addition, the government plays a role in increasing market access for domestic products and protecting consumers.

In regulating the domestic trade sector, the government has specific policy directions. The policy directions for the domestic trade sector have been regulated in Law Number 7 of 2014 Article 5 Paragraph 3.

The article contains a number of policy directions for the domestic trade sector, including structuring licensing procedures for the smooth flow of goods, providing facilities for the development of trade facilities, harmonizing regulations for trade activities between regions, fulfilling the availability of goods for the community’s basic needs, and so on.

Then the government has guidelines for structuring the domestic trade sector as stated in Law Number 7 of 2014. Control of domestic trade by the government, including the distribution of goods, trade facilities, licensing, inter-island trade, restrictions on trade in goods and services, and so forth.

Domestic Trade Characteristics

  • Using one kind of country’s currency.
  • Has a narrower scope, only within the country.
  • Disputes in trade are resolved by the law in force in the country.
  • When compared with export goods, product quality standards tend to be lower.
  • Has lower transportation costs.
  • Generally buyers and sellers face to face directly.
  • The distribution system is done directly
  • The level of competition is not so tight because it only competes with its own country.
  • Range costs are not stringent because they only compete with domestic producers.

International trade

International Trade is an activity in the process of trading in goods from the agreement of each country together. This economic activity is carried out in order to meet the needs of each country.

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Limited natural resources owned by each country is the background for international trade to occur. International trade consists of two kinds, namely exports and imports.

Export activities are activities in the context of selling domestic goods or services abroad. Meanwhile, import activities are economic activities carried out by buying goods or services from abroad to within the country. The purpose of both types of international trade is of course to gain profit.

Obtaining trade benefits that will increase the income of a country is the main goal of international trade. International trade is also often interpreted as buying and selling transactions with other countries. In practice, there are two core factors of international trade.

The first factor, countries that carry out international trade have different resources. The second factor, countries that carry out international trade actively produce goods on a large scale and of good quality.

It can be concluded, that international trade is an economic activity, both exports and imports that have an effect. International trade is an activity carried out by mutual agreement by residents of a country with residents of other countries.

In addition to the factors mentioned above, there are other supporting factors that encourage international trade activities to occur. Production cost savings are a driving factor for international trade.

Reducing production costs can be done if an item is produced in large quantities. Marketing of products can be extended to various countries through international trade. Differences in mastery of technology also become a driving factor for international trade.

Technologically advanced countries will carry out the process of producing and selling goods at prices that tend to be cheaper when compared to countries that use simple technology. A simple example that can be taken is that Japan, which exports cars to Indonesia, tends to offer lower prices compared to Indonesia, which produces its own cars.

In addition, meeting national needs also encourages international trade. Conditions where a country cannot meet the needs of goods and services needed by its people will make the government take import policy steps to fulfill them.

Transactions that occur certainly have a variety of profitable benefits. The benefits of international trade are increasing a country’s income and expanding employment opportunities.

Then these transactions between countries can meet the needs of goods or services that cannot be fulfilled by a country. In addition, international trade can maintain domestic price stability and encourage the growth and development of the business world.

If explored more deeply, international trade has a variety of other benefits besides those mentioned above. International trade has actually existed for thousands of years. Communication and transportation technologies that are increasingly developing to date have made trade activities between countries smoother.

Now, international trade can be said to be an important aspect in the economic growth of every country. There are various benefits that can be obtained by each country from international trade cooperation.

International trade can form and grow friendly relations between countries. Cooperation relations that are going well will develop various other sectors, such as culture, politics, military, education, and technology.

International trade that takes place in a country will create efficiency and specialization in the economic sector. The point is that residents of each country will have special skills that are different from other countries. Different special skills will produce various products, both goods and services.

The activities of economic actors, such as producers, consumers and the government can show indicators of a country’s prosperity. Economic actors who carry out international trade can increase the prosperity of a country. The increase in profit that occurs will make producers experience prosperity because of the sales of goods or services from various countries.

From a consumer perspective, international trade can increase prosperity if the consumption of goods or services is not hindered. International trade can also provide benefits for the government because the country’s foreign exchange income will increase if the value of exports is high.

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The production of goods and services in a country will increase if the foreign trade market expands. International trade can reduce unemployment because the need for labor will also increase in various sectors.

International trade activities also help stabilize prices in the domestic market of a country indirectly. The presence of international trade makes it possible to overcome the scarcity of goods at high prices through imports to increase the stock of the domestic market.

Although international trade cooperation brings many advantages, this activity can also bring negative impacts at the same time. The emergence of international trade can lead to industrial competition between countries.

If a country has poor production quality with relatively high prices, then the country’s demand will decrease. This happens because the majority of consumers will look for good goods at affordable prices.

Developing and poor countries will tend to be highly dependent on developed countries in terms of production of goods, especially those related to technology. When viewed from the consumption of goods, developed countries will dominate the development of electronic and automotive goods. The result is that most developing and poor countries will become just consumers.

International trade will also make it difficult for small industries to compete. To develop themselves, limited capital is often an obstacle for small industries. Because they have to compete with national and multinational industries that have larger capital, international trade activities have the potential to limit the space for small industries to compete.

Then international trade will lead to unhealthy competition. Making a number of policies such as dumping and import tariff practices is often a step for a country’s government to win competition in international trade.

This step is considered inappropriate because it will create unhealthy competition that damages the essence of international trade. The steps taken should be based on the principle of fair business competition.

Characteristics of International Trade

  • Using the agreed foreign currency.
  • It has a broader scope and knows no national boundaries.
  • Trade disputes will be resolved by international law.
  • Have special quality standards that must be met, such as ISO 4000, ISO 9000, and others.
  • Traded goods will be adjusted to natural conditions, tastes and preferences of the destination country.
  • Generally, buyers and sellers do not meet face to face.
  • Has an indirect distribution system.
  • The level of competition is more stringent because it competes with various countries.
  • Reach costs tend to be more expensive

That is a description of the characteristics of domestic trade and international trade. It can be concluded that domestic trade is the activity of trading goods and services within the territory of the Republic of Indonesia without involving foreign trade.

Meanwhile, international trade is trade activity based on a mutual agreement made by a country with other countries. Hopefully this article is useful for Sinaumed’s who read it!

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