There are many reasons why goods are exchanged among countries. These reasons are referred to in the literature as theories of international trade. They will be explained in greater detail in INTERNATIONAL TRADE.
In general, the reasons for trading goods among countries can be classified into two categories:
Supply differences (that is, differences in countries' material or technological endowments)
Demand differences (that is, differences in consumer preferences)
Theoretically, when supply differences exist, a country may either export the excess of local production over local demand or, if local demand exceeds local supply, import enough products from abroad to satisfy local demand. Differences between demand and supply offer only a partial theoretical explanation for international trade, however. In reality, a country may export a portion of its domestic production even though domestic demand is unsatisfied. Similarly, foreign goods may be sold in domestic markets that are literally glutted with domestic products. The price difference between domestic and foreign products is only one factor to examine in these seemingly paradoxical situations. Customer preferences and tastes for foreign products are usually much more important explanations.
Whatever the reasons for the exchange of goods among countries, the volume and importance for human survival of exchange activities have accelerated beyond anyone's imaginings. Over one-fourth of the world's products are traded among its over 150 countries.
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