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Commerce can be defined as trade between states or nations. It has been taking place since ancient times and has allowed for the exchange of needed or desired goods and services between different peoples. With advances in manufacturing, transportation and communication, commerce has continued to flourish.
Exports are goods and services sold to one country from another. Imports are goods or services bought by one country from another country.
Ideas about commerce and how freely it takes place has varied through time. In some countries protective tariffs are put on goods from other countries. A tariff is a special tax placed on a good manufactured and then imported into another country. For example, a toy that is priced at $10 in the United States could be exported to another country. A tax or tariff of $1 could be placed on the toy to raise its price to $11. Thus the toy would cost more in the other country than in the United States. Countries put tariffs on imports so that customers within a country will be more apt to buy its own country’s goods rather than those of other countries.
Countries are monitored closely as to whether they have a trade deficit or trade surplus. A trade deficit means they buy more goods from other countries than they sell to other countries. A trade surplus means that a country sells more goods and services to other countries than it imports or takes in from other countries.
Some countries have trade agreements between them meaning that they have reduced tariffs and other impediments to free trade lessened between them. Such agreements or treaties as the General Agreement on Tariffs and Trade (GATT) began in 1947 to reduce tariffs between 23 nations and now includes 105. In 1957 the European Economic Community was formed, and in the 1980s and early 90s European leaders signed agreements that would create a unified European economy in 1993. In 1992 leaders from the United States, Canada, and Mexico signed a treaty to form a North American free trade zone (NAFTA).
Another mechanism to help countries manage trade deficits is the International Monetary Fund (IMF).
One other barrier that affects trade between nations is political differences. This was true during the Cold War in the 1950s. 1960s and 1970s when communist and capitalist nations did not engage in trade. Sometimes countries will also impose an embargo on nations that they have disagreements wtih. An embargo is not allowing or prohibiting trade with a nation that it has a disagreement with.
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