What is international commerce, and why is it so important to the world we live in?
Quick answer:
International commerce refers to the act of buying and selling goods and services across international borders and nations. Businesses, individuals, and governments can all take part in this process, offering solutions to different countries around the world.
The chances are you’ve heard the term “international commerce” before. After all, it’s not an entirely new concept. For years, the commerce landscape has constantly expanded beyond the borders of “local sales”, giving consumers access to a wide range of products at competitive prices.
Essential to the growth of the global economy, international commerce has evolved in recent years, thanks largely to the digital transformation of the business environment. Ecommerce has opened the door for various forms of international selling, and countless companies are getting involved.
Today, we’ll explain the concept of international commerce, how it works, and what it means to your evolving ecommerce company.
What is International Commerce? The Basics
The world of international business runs on concepts like trade agreements, regulations, and tariffs. Some locations have their own “competitive advantage”. For instance, Chile has access to a huge coastline, while Canada is home to a large number of natural resources.
Many different companies participate in the international commercial system, each with their own set of laws for global business, and the exchange of goods. That’s one of the reasons why there are global regulatory agencies in place to structure the commerce market.
The World Trade Organization (WTO) and the International Chamber of Commerce (ICC) are two of the main organizations that oversee global markets, international commerce regulations and sales.
International Trade vs International Commerce
In the International business landscape, there are two terms which tend to overlap: international trade, and international commerce. Although the concepts seem similar, there’s a technical distinction between them. Global trade refers to the economic process of selling, buying, or exchanging goods and services between multiple parties in a marketplace.
Commerce, on the other hand, looks at all the activities that promote the exchange of goods and services, from the point of manufacturing an item, to the moment an item is purchased in a store. This means the concept covers not just sales, but banking, freight, warehousing, insurance, international marketing, advertising, and more.
The Laws Surrounding International Commerce
As mentioned above, there are various regulations in place to help minimize issues and aid dispute resolution in the international commerce market. Any business engaging in international commerce will be subject to the specific laws set by the country they sell in (such as China or the US).
Additionally, they must also follow the laws of the countries in which they’re conducting business. For instance, if you’re running an American company, and you sell products to China which cause a customer injury, you could be sued in a Chinese court.
Businesses are also subject to the treaties governing international commerce in the countries connected to your supply chain and business processes. You may need to follow the North American Free Trade agreement, or adhere to intellectual property laws in the EU.
The Challenges of International Commerce
Investing in the global economic market is an excellent way for a small business to grow, particularly in today’s ecommerce market. However, it’s not without its challenges. There are various points you’ll need to consider when setting up your company, such as:
- Intellectual property law: IP law is governed on a national level. You’ll need to consider the IP protections in place in any country where you’re going to be marketing and selling a product. Some countries have more robust laws in place to protect your IP than others.
- Cultural differences: To sell in global markets, you’ll need a deep knowledge of the cultural differences between different countries. Everything from body language to tone of voice, and different customer preferences can influence the growth of your business.
- Logistics and supply chains: Supply chains and logistics make up some of the most complicated parts of international commerce. Major events can have an impact on the movement of cargo for any business. This means you’ll need to stay up-to-date on how global economic and political environments impact delivery processes.
- Duties, taxes, and tariffs: Different countries impose different taxes, duties and tariffs on products and services. Products sold by a US business to the United Kingdom, for instance, are subject to a 20% tax charge on most goods sold. This is something you’ll need to consider when implementing pricing strategies for your products and services.
- Dispute resolution: Resolving disputes in international commerce can be complex, as each country has its own trade policy, and specific rules. Some countries work well together to ensure business leaders can be held accountable for breaking the laws. However, other countries don’t provide the same level of guidance or support.
Investing in International Commerce
Building a business with a focus on international commerce can be complex. There are many different rules and guidelines to consider, covering everything from human resources, to how you market and deliver your products and services.
However, international commerce can offer a lot of opportunity to businesses who can overcome the complexities of the market. With the right strategy, you can sell in US, English, European, and countless other markets at the same time, increasing your chances of sales.
However, if you’re interested in international commerce, you will need to ensure you’re doing the right research to understand the markets you want to enter. You may need to speak to economists, lawyers, and other professionals to create a comprehensive plan for success.
FAQs
What is international business trade and commerce?
International business trade and commerce is the concept of buying and selling goods and services between multiple countries. It can involve the transfer of various resources, from technology and labor, to goods, services, and capital across global borders.
What is an example of international commerce?
There are plenty of examples of international commerce to explore. For instance, one example is a company in the United States importing goods from China using a dropshipping service. Another example could be a company in Canada exporting goods to the United Kingdom.
What is the International Commerce Association?
The International Commerce Association, or International Chamber of Commerce is an organization created to promote effective international trade for the growth and prosperity of the economy. The company regulates and resolves business disputes in international commerce.
