Posted on

Differences between Domestic and International Trade

Domestic trade is also known as internal trade. It involves the exchange of goods and services among the residents of a country. Domestic trade, therefore, involves trading activities of all types carried out within the national boundary. When a business man buys palm oil from Port-Harcourt and sells to a trader in Kano, such trade is called domestic trade.

On the other hand, International trade involves the exchange of goods and services between Nigeria and other countries of the world. Therefore, the exchange of goods and services between countries is known as international trade. Another name for international trade is external or foreign trade.

Great differences exist between domestic and international trade. They include among others:

(i) Domestic trade takes place within the internal boundaries while international trade involves exchange of goods and services across national boundaries.
(ii) In domestic trade, only one national currency is in use,whereas international trade involves more than one currency.
(iii) In domestic trade, there are no trade restrictions. But in international trade, restrictions exist through the use of quota systems, exchange control measures, tariffs, licensing, etc.
(iv) There is greater mobility of factors of production in domestic trade than in foreign trade.
(v) Domestic trade involves little transportation cost, while international trade involves higher transport cost.
(vi) There are numerous retailers and retail outlets in domestic trade, while international trade involves a few merchants who can afford the costs and risks associated with it.
(vii) Domestic trade is not a foreign exchange earner, while international trade helps a country to earn foreign exchange.