Most countries trade with others in order to acquire what they need and help their economies expand. Canadians aren’t limited to home-grown products and markets; we can sell domestic goods abroad and bring in items from foreign countries.
So just what does the process involve? This post describes the three main types of international trade: import, export, and entrepot. Keep reading to learn more about each type of trade and see how they work together in the global supply chain.
TABLE OF CONTENTS
- What is International Trade?
- Import Trade
- Export Trade
- Entrepot Trade
- Advantages of International Trade
- How to Get Started in International Commerce
WHAT IS INTERNATIONAL TRADE?
International trade refers to the trading of goods and services between different nations. This allows companies to expand their markets and gives consumers access to items that wouldn’t otherwise be available to them.
Different countries have different assets, so they can produce certain goods more efficiently and inexpensively than others. International trade is based on the concept of each country specializing in specific commodities, products, or services and making them available globally. That way, each country can focus on what it does best and obtain the things it lacks through trade with other nations.
The flow of materials and goods across borders is critical in today’s globalized economy. A recent report noted that international trade has accounted for over half of Canada’s gross domestic product every year for the past three decades—even amid the global supply chain disruptions wrought by the pandemic.
Moving goods across borders is big business
Import trade involves bringing foreign-produced goods or services into the country. According to government data, Canadian imports totalled $764 billion in 2021—an increase of more than 10 per cent over the previous year.
Basics of an Import
A country will import goods if those goods aren’t available domestically or can’t be produced in high enough quantities to meet demand. For instance, Canada’s climate does not support the production of tropical fruits like bananas or avocadoes, so we import them from places like Costa Rica and Mexico.
Goods might also be imported if they can be produced more cheaply or efficiently in other countries. Crude oil is one example. Canada actually produces enough crude oil to meet its refining needs, yet some Canadian refineries still import oil from foreign countries because they don’t have easy pipeline access to domestic supplies.
Import trade can give a country’s consumers access to a wider variety of products and services, often at a lower price.
Regulations and Restrictions
Canada has rules governing the importation of certain products. Some items are completely banned, such as material depicting child pornography. Others must meet certain requirements before they can be brought into the country. For example, government policies state that you need authorization from a provincial liquor authority in order to import wine or beer. If you’re hoping to import cars or trucks, you must ensure that they meet domestic emissions control standards.
Many imports are subject to tariffs. A tariff is a tax the government charges on imported goods. Tariff barriers are often put in place in order to protect local industries—by raising the price of imports, tariffs can make domestically produced goods more attractive to consumers. However, import tariffs can also impact global supply chains and hurt a country’s exports.
Imported goods must meet certain requirements and are often made more expensive because of tariffs
Examples of Import Trade
Every year, Canada imports hundreds of billions of dollars worth of goods from other countries. Most of these items come from cross-border trade with the U.S. Here’s a list of our major trading partners and a few examples of what they supply us with:
- The U.S.: Cars, machinery, medicines, food
- China: Laptops, cell phones, toys, video game consoles
- Mexico: Cars, vehicle parts, vegetables, fruits
- Germany: Cars, pharmaceuticals, electronic equipment
- Japan: Cars, robotics, computer parts, metals, minerals
Canada imports many products from China
Export trade is about selling domestically produced goods or services to purchasers in other countries. Federal government data shows that Canadian exports reached a record high of $766 billion in 2021, mainly thanks to soaring prices for natural resources.
Basics of an Export
Offering products to other countries gives companies access to a whole new world of potential customers. Goods are often exported if they can fetch a higher price in foreign markets, if the global demand for them grows, or if they are produced in higher quantities than the domestic market can support.
Governments typically encourage exports because it allows domestic companies to expand their market reach, resulting in more jobs, higher wages, and greater economic growth.
Exporting goods allows companies to extend their reach around the world
Regulations and Restrictions
A wide range of products are subject to export controls when leaving Canada. The list includes products as diverse as firearms, seafood, lumber, and clothing. It also encompasses technology that has military or national security implications.
Sometimes governments impose trade restrictions or trade barriers (i.e. sanctions) on certain nations. When that happens, companies are not allowed to export to those countries. For example, in the wake of the invasion of Ukraine in early 2022, Canada stopped issuing permits for exports to Russia.
Examples of Export Trade
The U.S. is Canada’s biggest market for exports, but it isn’t the only one. Have a look at the types of goods we sell to other countries:
- The U.S.: Oil, motor vehicle parts, forestry products and building materials, metal and mineral products
- China: Coal, iron, copper, canola, wheat
- The U.K.: Oil, mechanical power generators, inorganic chemicals, cereals
- Japan: Wheat, canola, pork, fish, metals and minerals, medical devices
- Mexico: Canola, wheat, cars, industrial machinery
Wheat is one of Canada’s top exports
Entrepot is a combination of the other two types of international trade: import and export. This term is used when a country imports goods or materials with the intention to export them out again at a higher price.
Basics of Entrepot Trade
In entrepot trade, the importing country acts as an intermediary. Goods are imported without being distributed or consumed locally, and no import duties are charged. The goods are then re-exported, possibly (though not necessarily) after having some value added.
Entrepot trade may be used when a middleman country offers better processing facilities or logistical connections. This type of transshipment or re-export trade is commonly conducted in Asian ports like Singapore and Hong Kong.
ADVANTAGES OF INTERNATIONAL TRADE
There are many economic benefits of trade between countries. For example, international trade generates job opportunities in companies that buy and sell in foreign markets. Plus, companies that trade in multiple countries are better protected against regional market fluctuations, making them more stable and secure employers.
Trade also stimulates international market competition, which encourages companies to become more innovative and efficient. Local producers must ensure that their offerings are on par with those from foreign firms.
International trade promotes market competitiveness
When a country develops a reputation for a certain product, production goes up. When production volumes go up, the cost of producing each item comes down—which means producers can sell them at a lower price.
Thus, international trade benefits local workers by creating jobs and boosting living standards. It also benefits local consumers by providing access to high-quality goods at competitive prices.
HOW TO GET STARTED IN INTERNATIONAL TRADE
If you want to break into this industry, look for a post-secondary program in international commerce. You can opt for a university degree, which typically takes four years. Or you can go for a college diploma, which can usually be completed in two years or less.
Training covers international trade laws, ethics, supply chain management, marketing, and more. Students learn how to:
- Interpret and follow trade regulations
- Identify opportunities and risks in international markets
- Create a business plan for a company that trades across borders
- Negotiate with producers, suppliers, and distributors
- Prepare the documentation needed to import and export goods
- Organize the efficient transportation of goods
- Promote and sell products overseas
- Handle international payments
A good international commerce program will also include a work placement so you can practise your skills and build your confidence in a real-world setting. This can be a major advantage when it comes to landing your first job in the industry.
READY TO TRAIN FOR A CAREER IN INTERNATIONAL TRADE?
Ready to learn about global trade on another level? Have a look at the International Commerce & Import/Export diploma program at Herzing College Montreal. Training is available both on campus and online and can be completed in 14 or 24 months, depending on the pace you choose. A two-month internship is included.
Still have questions? An admissions advisor can provide details about courses, costs, start dates, application procedures, and more.
Click below to learn more about the international commerce program and chat live with an advisor. We’re here to help!