Difference between Internal Trade and External Trade
Trade is an economic concept involving the buying and selling of goods and services. Trade typically occurs between at least two parties, which can be individuals or businesses. There are two primary types of trade: Internal Trade and External Trade.
Internal Trade refers to business transactions that occur within the geographical and political borders of a single country.
Conversely, External Trade (or international trade) involves transactions between parties in different countries.
Let’s explore the key differences between internal and external trade:
Difference Between is as follow:
| Aspect | Internal Trade | External Trade |
|---|---|---|
| This means | When two parties within the same country buy and sell goods with each other. | When two parties in different countries buy and sell goods with each other. |
| Countries Taken Part | Only one country’s government is involved. | Involves two or more countries and their respective governments. |
| Money that is involved | Payments are made using domestic currency. | Payments are made in an agreed-upon currency, often involving foreign exchange. |
| There is risk | Less risky compared to external trade. | Higher risk due to factors like currency fluctuations and economic conditions. |
| Effects on the Foreign Reserve | No effect on foreign reserves as all transactions occur within the country. | Impacts foreign reserves by influencing the country’s foreign exchange stock. |
| Limits | Fewer regulations and restrictions. | Subject to various regulations and restrictions, such as tariffs and trade agreements. |
The article focused on the distinction between internal and external trade, highlighting the differences in how trade operates within and between countries. For further insights and engaging content, continue to follow Eduacademy.