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Trade means purchase and sale of goods with profit motive. It involves exchange of goods and services between buyers and sellers. There must be certain consideration between the two parties. Trade is the central activity of commerce. Other activities of commerce such as transportation communication, financing, insurance, warehousing and marketing are the supporting activities of trade.

Types of Trade

Trade may be classified into:
(i)    Internal trade, and
(ii)    External or International trade.

(i)    Internal Trade. Home trade or internal trade means buying and selling within the boundaries of a country. Both the buyer and the seller belong to the same country. Home trade may further be divided into (a) Wholesale trade, and (b) Retail trade.

(a)    Wholesale Trade. It involves buying and selling in large quantities. A wholesaler acts as the link between producers and retailers.

(b)    Retail Trade. It involves buying and selling of goods in small quantities. A retailer serves as a link between the wholesaler, manufacturer and consumers. He maintains personal contacts with ultimate buyers.

(ii)    External or International Trade. Foreign trade or external trade or international trade refers to trade between two nations. It implies buying and selling of goods between tow or more countries. International means of transport and foreign currency are used in foreign trade can be of three types:

(a)    Import trade, (B) Export trade, and (c) Export or Re-export trade.

(a)    Import Trade. When the trader of one country buys the goods from foreign countries, it is known as import trade.

(b)    Export Trade. When the trader of country sells goods to a foreign country, it is known as export trade, e.g., if an Indian Tea Company sells tea to U.S.A., it is export trade.

(c)    Export or Re-export Trade. It involves import of foreign goods with a view to re-export them and making a profit in the process. For examples an Indian may import certain commodities from European countries and export them to Bhutan.

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