HOME TRADE VS FOREIGN TRADE — SIMILARITIES AND DIFFERENCES

Home trade is the buying and selling of goods and services within the geographical area of a country.

It can be divided into wholesale trade and retail trade.

On the other hand, foreign trade is the exchange of goods, services and capital between two or more countries. 

Foreign trade can either be in the form of import, export and entrepot.

Both have similarities and differences, which will be discussed in the following headings.

Similarities Between Home Trade and Foreign trade

1. Both involve the use of money: Both foreign trade and home trade involve the use of money as a medium of exchange.

2. Both involve voluntary exchange: Exchanging goods and services in both home trade and foreign trade is voluntary, and not coercive.

The seller has the freedom to decide to sell or not sell his product.

3. Both have distance barriers: There is the possibility of distance differences in both home and foreign trade.

As a result, goods and services must be transported from one location to another. The cost of transportation may be borne by the seller alone, the buyer alone or both of them.

4. Both require a trade agreement: trade cannot take place in home trade or foreign trade without a trade agreement between the buyer and seller.

The trade agreement will specify the terms of trade, the means of payment, how goods or services are to be delivered and who pays for delivery fees.

5. Both must comply with state laws: Trade done domestically or internationally must comply with the rules and regulations of the country in which it is done (home trade) or each country involved in the trade (foreign trade).

6. Both have buyers and sellers: Both home trade and foreign trade involve the exchanges of goods and services between buyers and sellers.

7. Facilitated by aids of trade: Both home and international trade are facilitated by activities such as transportation, warehousing, advertising, banking etc.

8. Both pay tax: To transact both home trade and foreign trade, tax is paid directly or indirectly to the government.

Differences between Home trade and Foreign trade

1. Home trade takes place within a nation, whereas foreign trade takes place between two or more nations

2. While different currencies are used in foreign trade, the same currency is used for home trade.

3. Home trade costs less to transport because it takes place within a single nation.

However, because it involves two or more countries, foreign trade has high transportation expense

4. Unlike foreign trade, which can be divided into import, export, and entrepot trade, home trade can be divided into wholesale and retail trade.

5. Road and rail transportation is usually preferred in the home trade. 

On the other hand, water and air transportation are the most preferred forms of transport in foreign trade.

6. Unlike home trade, which is exempt from customs duty, Foreign trade is subject to customs duty.

7. Only local laws from the home country are observed in the home trade.

However, in addition to the local laws of the countries concerned, there are additional international laws that must comply with in international trade.

8. Language barrier is more in foreign trade than in home trade. 

In the same vein, the language barrier is less in home trade than in foreign trade.

9. Insurance coverage is a prerequisite for conducting foreign trade.

Home trade, however, allows for transactions to be completed without insurance.

10. Trade wars and tariffs have the potential to limit foreign trade.

In contrast, there are rarely any incidents of prohibitions in domestic trade.

11. Because the methods of payment available in the exporting and importing countries may differ, there are differences in banking systems in foreign trade.

This contrasts with home trade, where there are no banking distinctions as trading takes place within the same nation 

Features Home tradeForeign trade
Involves one countryMultiple countries
Use of money YesYes
Currencies usedOne Multiple
Transportation costsLessMuch
Distance barrierPresent, but lesser than foreign tradePresence, but more than home trade
Insurance coverage Not necessaryCompulsory
Is tax paid?YesYes
Is custom duty paid?NoYes
Language barrier rareCommon

Conclusion

To summarize, the major similarity between home trade and foreign trade is that both involve the buying and selling of goods and services with money.

The major difference between home trade and foreign trade is that home trade takes place within a country while foreign trade takes place between two or more countries.

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