Business is one of the few things that have been recorded through the entire human history. In the prehistoric times, around 3,000 B.C.E, people used to do business. The only difference is that people at that time used to trade goods for goods. They used to exchange goods they had in plenty with goods they needed. That kind of business was local or domestic. People from one region within a country used to go to other regions to exchange goods. Different communities realized that there were other goods that they did not know and were available in long distances. This was realized when people from different regions travelled long distances in search for more resources. Word soon spread across the world and communities from different parts of the globe started to look for the different goods. There were goods that were more precious. Merchants went across the world just to get those goods. Such countries included China, India, America and Europe. International business started to blossom at that time leading to a number of civilizations.
Domestic business or trade is a form of business, which is confined to the borders of a country. People within that country or territory buy goods and services within their borders. Domestic trade is usually good as it develops local infrastructure and also plays a role in enriching its own. This form of trade is probably the oldest form of trade. It was the main type of business in many parts of the world long before, merchants started to go to far lands.
On the other hand, international business is business between countries. In this case, merchants from different countries exchange goods for money. Different countries are endowed differently. There are some that are good in industries while others have resources that can be used as raw materials for their industries. The country with industries, for example, would buy raw materials from the country with those resources. Money paid to the country with the resources would be used to buy industrial goods from the industrialized country. Ideally,what is sold to another country is export and what is received from another country is imports. The two countries benefit by getting what they did not have and foreign exchange (Curtin, 2002).
One country can trade with many countries depending on its needs. Some countries have been found to import much more than they import while others export much more than they import. Countries importing more are known as net importer countries, for example, the United States while countries that export more are known as net exporter countries, for example, Japan. International business has assisted many countries to develop and share with others. The unique characteristic of international business is that it also boosts domestic business in some way.
Use of the terms domestic business and international business has been very confusing to some people in some scenarios. For example, there are some people who may argue, since domestic business is in certain territories or countries, then in countries with state government systems, the individual states experience both domestic and international trade in some way. Such people will argue that a State like California and Texas trading is international business. Nevertheless, different counties within California do domestic trading. According to such people, interstate trade is the same as Britain and France trading (Curtin, 2002).
This theory is true, to some extent, and wrong in another way. The different states in the United States represent some form of territorial jurisdiction. In fact, some states operate very differently from others. They have their own regulations for different things and differ from others. Each state has its own governing body that is responsible for drafting and passing policies. As such, the different countries of diverse regions with the state experience domestic business with each other. For example, one region in Texas could be known for growing corn while another region within the same state could be known for ranching. The corn growing region would need meat while the ranching region would need corn. The two regions would have done domestic business.
On the other hand, one state doing business with another within United States still remains domestic business. This is because the different self-governing states are all part of the United States as a country. They are just units created to make governing the country easily by ensuring that every unique region is represented well. Therefore, if a rancher in Texas sells his cattle to a person in Louisiana, and a farmer in Oklahoma sell his merchandise to a buyer in Texas, all that would be termed as domestic business. Domestic business in United States can be considered even in scenarios where goods, services and money are exchanged between businesses and clients in East or Central United States and Alaska, which does not even seem to be part of the United States, because of where it is located (Curtin, 2002).
Although domestic trade or business is within countries, there are some regulations in countries that have the State system of governance. Some states in the United States and Australia have specific requirements that have to be met when goods are exchanged with another state. At the same time, a business owner may be required to do an application to be allowed to do business in that state. Such regulations are not stringent for businesses within the respective countries compared to when international businesses are involved. They are usually for consumer protection just in case, there are issues or problems. Only certain types of businesses are required to do so in most cases.
As stated above, International business can only occur when a company within the United States, in any state, sells merchandise to clients in another country. It can be said to have taken place in such a case. It can be between countries that border each other or countries that are far from each other. An example can be Britain and France or between Britain and China. The two countries are two independent jurisdictions with varying regulations on international business.
Regulations on international business in the various countries are aimed at varying reasons. Some countries’ regulation is for protecting the domestic companies. United States, for example, protects the domestic companies against competition from international companies. As such, if there are American companies providing products or services within United States, the government prefers to have the American company sell the products and services to Americans rather than having an international company provide the same products or services.
Moving goods and services from country to country is not always easy. Governments in the selling and buying countries have to raise some money from the companies through various forms of taxes. As such, a company that would like to sell its merchandise in another country has to be prepared to pay some tariffs to get the goods or services in the other country. Tariffs make the goods and expensive more expensive. The manufacturer or provider of the goods and services passes the extra cost down to the clients (Choi and Hartigan, 2004). This would not be the case when goods and services are exchanged between states in countries like United States, Australia and other countries that have the state system of governance. After all, the government for all the states within the jurisdiction is one.
The government policy on protecting of consumers from exploitation has been very keen to ensure that imported goods and services prices are reduced. Countries in the same regions came up with policies that would see the tariffs charged decreased, for imports and exports within the countries that region. Organizations such as European Union, European Free Trade Agreement EFTA, Central American common Market CACM, North American Free Trade Association, Andean Pact, COMESA, ECOWAS, and many others were formed with this objective.
These institutions fall under four broad categories. One, Free Trade Area in which member countries agree to reduce charges, tariffs and quotas for goods imported and exported within member countries. Second, Custom Unions in which members agree to reduce tariffs for member countries. Third is the common market in which the member countries agree to remove all trade barriers for member countries and fourth is economic union in which member countries come up with universal trading policies and regulations to govern all member countries (Reuvid and Sherlock, 2011).
Countries with large client base in other countries in different regions of the world felt left out. A proposal as made to have all the countries in the world support free trade. This is basically international business between countries across the world with fewer tariffs and quotas. This is regulated by World Trade Organization, which ensures that each country reduce the trade barriers and trades in harmony with other members of the organization. Countries choose the organizations to join. Jurisdictions that are not members of organizations cannot be restricted to do business by the organizations.
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