Concerns about international trade

Detail

1. Why trade is a concern at all

• International trade means buying and selling goods and services across national borders.
• It is neither all good nor all bad. NCERT draws up a balance sheet: trade helps a country when it gets better access to markets and goods. It hurts a country when that country becomes too dependent on others.
• Whether a country gains or loses depends on what it trades and on what terms (who sets prices, who controls supply).

2. Benefits of international trade (NCERT)

Benefit	What it means in simple words
Regional specialisation	Each region produces what suits its resources, climate or skills best. Examples: tea from Assam, oil from West Asia, machinery from Germany.
Higher production	Bigger world markets → bigger scale of output → lower cost per unit.
Better standard of living	People can buy goods their own country cannot make or grow.
Worldwide availability of goods and services	Food, medicines and technology reach places that lack them.
Equalisation of prices and wages	Goods and labour move from cheap places to costly places, so price and wage gaps between countries narrow.
Diffusion of knowledge and culture	Ideas, technology, food habits and art spread along trade routes, as they did on the old Silk Route.

3. Harms of international trade (NCERT)

• Dependence on other countries: a country that imports food, fuel or machinery is open to price shocks and supply cuts.
• Uneven development: gains go mostly to countries that export high-value manufactured goods and services. Countries that export cheap raw materials gain less.
• Exploitation: strong economies and companies can force unfair terms on weaker ones. Colonial trade is the classic case: raw cotton went from India to Britain, and finished cloth came back.
• Commercial rivalry leading to wars: competition for markets and raw materials has caused conflict. Examples are the colonial wars and the Opium Wars between Britain and China (1839–42, 1856–60).

4. The environmental chain (NCERT)

Competition to trade more → resources run out → nature is damaged

• Step 1 – cause: countries compete to export more. Production and the use of resources rise again and again, like a spiral.
• Step 2 – process: resources are used faster than they can be replaced (replenished). Renewable resources such as fish, forests and water are drawn down below their natural rate of recovery.
• Step 3 – result:
• marine life is declining (overfishing for export markets);
• forests are cut down (timber, and land cleared for export crops);
• river basins are sold to private water companies, so water becomes a traded product rather than a shared common resource.

Multinationals and pollution

• Multinational corporations (MNCs) are companies that produce and sell in many countries. In oil, gas, mining, pharmaceuticals and agri-business they expand at any cost.
• The result is more pollution. This goes against sustainable development: development that meets today's needs without reducing the ability of future generations to meet their own needs (Brundtland Report, 1987).

5. Present-day form 1 — trade and climate

• Embodied (embedded) emissions: the greenhouse gases released while a product is made. When steel is exported, its carbon "travels" with it, but the emissions are counted in the country that produced it.
• Carbon Border Adjustment Mechanism (CBAM): an EU rule that puts a carbon price on imports of certain goods. The price is based on the embedded emissions of those goods and matches the carbon cost that EU producers already pay under the EU emissions trading system [2].
• It is part of the EU Green Deal [2].
• Reporting-only (transitional) phase: from October 2023.
• Charges (definitive phase): from January 2026.

• Sectors covered: steel, aluminium, cement, fertilisers, hydrogen and electricity.

• Why India objects

• India calls CBAM a unilateral trade barrier: one side imposes it without agreement. India also says it goes against the climate principle of Common But Differentiated Responsibilities (CBDR).
• Indian steel exporters must now meet strict carbon-reporting requirements. MSMEs and secondary steel producers are poorly equipped to measure and record embedded emissions, so they could lose competitiveness [2][3].
• CBAM may also reshape value chains, not just exports to the EU. The UK plans its own CBAM from 2027, which adds to the compliance burden on Indian steel [2].

• India has raised CBAM in WTO bodies and also bilaterally with the EU [2].

• EU Deforestation Regulation (EUDR): an EU law that keeps products linked to recent forest clearing out of the EU market and makes exporters prove that their supply chains are "deforestation-free". It is a similar case of an environmental rule that works as a non-tariff barrier for exporters in developing countries.

6. Present-day form 2 — trade as a weapon

• Weaponised interdependence: a country that controls a key part of world trade (chips, minerals, payment systems, shipping routes) uses that control to pressure other countries.
• Export controls on semiconductor chips and critical minerals: limits on selling advanced chips, chip-making tools and processed critical minerals (rare earths, gallium, graphite) to rival countries.
• Sanctions on Russia after 2022: limits on its energy exports, finance and technology imports.
• Link to the NCERT "harms": this is today's form of "dependence on other countries" and "commercial rivalry". Related topics: secondary activities (manufacturing chains) and primary activities (mining of critical minerals).

7. Present-day form 3 — supply-chain shocks

• Supply chain: the series of steps and places through which a product is made and delivered, from raw material to factory to port to buyer.
• COVID-19 (2020–21): factory shutdowns and port congestion showed how risky it is to depend on one country or one route.
• Red Sea attacks (from late 2023)
• Location: the Red Sea links the Indian Ocean (through the Bab el-Mandeb strait, between Yemen and Djibouti) to the Mediterranean Sea (through the Suez Canal, Egypt).
• Its importance: the Red Sea carries about 30% of world container traffic [4]. About 15% of global maritime trade volume normally passes through the Suez Canal [5].
• Cause: Houthi attacks on ships, starting November–December 2023 [4][5].
• Process: shipping lines stopped using Suez and sent ships around the Cape of Good Hope (southern tip of Africa) [5].
• Result:
  • Suez trade fell by 50% in the first two months of 2024 compared with a year earlier [5];
  • Cape of Good Hope traffic rose about 74% [5]. The World Bank put the rise in navigation there at about 100% by end-March 2024 [4];
  • deliveries took 10 or more days longer [5], and some cargo and tanker routes became up to 53% longer [4];
  • freight rates, insurance costs and CO₂ emissions went up because longer voyages burn more fuel [4].

• Still continuing: by 2026, transits through Bab el-Mandeb were still at about half the pre-attack level [6].

• Related topic: world transport and communication (sea routes, canals, chokepoints).

8. Present-day form 4 — commodity dependence

• Commodity dependence: a country is commodity-dependent when more than 60% of its merchandise exports are primary commodities, i.e. raw farm, mineral or energy products such as cocoa, copper and crude oil (UNCTAD definition) [7].
• Scale: 101 of 191 UNCTAD member states are commodity-dependent (State of Commodity Dependence 2023) [7].
• Where it is worst: Africa and South America. The median share of commodities in a country's total exports is 90.0% in Africa and 87.8% in South America [7].
• 32 of the 46 Least Developed Countries and 27 of 32 low-human-development countries are commodity-dependent [7].
• Why it is a problem
• Family incomes and government revenue both depend on commodity prices, so a price crash hits the whole economy [7].
• Raw products are exported and processed abroad. The value is added elsewhere, which limits diversification and investment [7].

• Climate change, COVID-19 and the war in Ukraine exposed this weakness. In 2020, 32 million people in LDCs were pushed into extreme poverty [7].

• This is NCERT's "uneven development" and "exploitation" in today's form.

9. Link to sustainable development

• All four modern concerns lead back to NCERT's environmental chain. Trade that ignores ecological limits and fairness is not sustainable.
• Possible responses:
• diversify export products and partners;
• add value at home, i.e. process raw materials before exporting them;
• use multilateral (WTO) rules instead of unilateral barriers;

• run green production with transparent carbon accounting, e.g. India's carbon market.

• Related topic: planning and sustainable development.

Prelims Hooks

• NCERT lists "equalisation of prices and wages" and "diffusion of knowledge and culture" as benefits of trade. "Commercial rivalry leading to wars" is a harm.
• NCERT's environmental examples of over-trading: declining marine life, deforestation, river basins sold to private water companies.
• NCERT names the MNC sectors that expand "at any cost" as oil, gas, mining, pharmaceuticals, agri-business.
• CBAM: EU measure. Reporting from October 2023, charges from January 2026. Six sectors: steel, aluminium, cement, fertilisers, hydrogen, electricity. Trap: crude oil, textiles and plastics are not covered.
• The UK plans its own CBAM from 2027 [2].
• Bab el-Mandeb lies between Yemen and Djibouti and is the southern gate of the Red Sea. The Suez Canal (Egypt) is the northern gate.
• The Red Sea carries about 30% of world container traffic [4]. Suez normally carries about 15% of global maritime trade [5].
• Ships avoiding the Red Sea go around the Cape of Good Hope, adding 10 or more days [5].
• Commodity-dependent = commodities make up more than 60% of merchandise exports. 101 of 191 UNCTAD members qualify (2023) [7].
• Highest median commodity export share: Africa (90.0%), then South America (87.8%) [7].

Mains Points

• Benefits vs harms of trade (GS-I/III): specialisation, scale and spread of knowledge versus dependence, uneven development and rivalry. Commodity dependence in Africa and South America (101 of 191 countries) shows how unequal terms keep the gains with processors and away from raw-material exporters [7].
• Trade–environment link (GS-III): competition → resource use spirals → overfishing, deforestation, water privatisation, MNC pollution. Today the same link appears as CBAM and the EUDR: rules to stop "carbon leakage" that India sees as unilateral barriers hurting MSMEs. India has taken the issue to the WTO and to the EU directly [2][3].
• Supply-chain risk and chokepoints (GS-I geography / GS-III): COVID-19 and the Red Sea crisis show how sensitive trade is to narrow sea passages. Suez trade fell by half, routes via the Cape became longer, and costs and emissions rose [4][5][6]. Policy answers include diversified routes, port capacity and strategic reserves.
• Weaponised interdependence (GS-III): export controls on chips and critical minerals and sanctions on Russia make dependence a security issue. This calls for self-reliance in key inputs and diversified partners.