How much do you know about trade?

Concept of Trade

Trade is a general term for the act of buying, selling or trading, and usually refers to all exchange activities or acts in which money is the medium. It has a wide scope, including the exchange of goods engaged in by commerce and the buying and selling of goods organized by producers of goods or by others, etc.

Development of Trade

With the development of society and the progress of technology, the subject of trade extends from real to virtual, and the market expands from tangible to intangible, constantly enriching and progressing. All the changes are the same.

The core of trade is exchange. Exchange is the unification of the two opposing processes of delivery and payment. Between free and equal normal subjects, the exchange follows the principle of equivalence and synchronization. Synchronous exchange, which is the mutual condition of delivery and payment, is a guarantee of equivalence.

The exchange process is divided into the stage of exchange agreement and the stage of transfer of the subject matter. The subject matter contains goods, services, labor, technology, information, etc. The exchange agreement is a so-called equivalent value of the subject matter that both opposing subjects can accept and agree with each other. The transfer of ownership of the subject matter is conditional on the simultaneous interaction of the consideration, so the exchange is realized in a dynamic process.

In practice, for face-to-face transactions of ready-made subjects, synchronous exchange is easy to achieve; however, in many cases, due to the process required for the flow of acceptance of the subject matter of the transaction (e.g., the flow of goods and services, the transformation of service labor), the contradiction of asynchronous and separate flows of goods and funds is inevitable, and synchronous exchange is often unrealistic.

Asynchronous exchange, the party who receives the consideration first is prone to violate the morality and agreement and undermine the principle of equivalence, so the party who pays the consideration first is often subject to the risk of being passive and vulnerable. Asynchronous exchange must be accompanied by credit guarantee or legal support for the exchange to be successfully completed. Virtual credit is an uncertainty that must be made certain through real guarantees. Synchronous exchange, on the other hand, hedges the risk of unequal exchange.

As one of the two opposing processes in exchange, payment, subject to conditions and methods, the current payment method is often a simple immediate direct payment transfer, a one-step payment. For example, domestic settlement methods, according to different criteria have different classifications, here according to the form of settlement, divided into bill settlement, bill settlement (including checks, promissory notes, bank drafts, promissory notes), remittance settlement (including wire transfer, online payment). In addition to promissory notes, all the above can be regarded as cash settlement. Among them, bill settlement and note settlement are suitable for in-person spot transactions, which can realize synchronous exchange (checks are individual credit risk of malicious bounces from factors such as short, leading to asynchronous exchange); transfer settlement is suitable for inter-face spot transactions, for inter-face or futures transactions, if there is no credit guarantee and legal support, immediate one-step payment leads to asynchronous exchange easily triggers non-equivalent exchange risk.

In reality, the buyer can’t harvest the subject matter on time and in quality and quantity after paying first, and the seller can’t receive the price on time and in full after delivering first, and the economic disputes caused by delay, discount or refusal to pay occur from time to time. In contrast, the letter of credit settlement in international trade settlement focuses on following the principle of simultaneous exchange, which reflects the concept of step-by-step payment process and effectively prevents payment risks.

In a comprehensive manner, to ensure the equivalence of exchange to follow the principle of synchronous exchange, to prevent the risk of asynchronous exchange. For in-person spot trade, adapt the immediate one-step payment method; for alternate or futures trade, adapt the process-oriented distributed payment method.

Trade arises for numerous reasons. Due to the specialization of labor, individuals will only work in a small category, so they must trade to obtain the daily necessities of life. Trade between two regions is often due to the relative advantage of one place in producing a certain product, such as having better technology, easier access to raw materials, etc.

Trade characteristics

(a) international trade is a business activity with foreign nature
(B) international trade is a transnational transaction, the situation is complex
(C) international trade is vulnerable to changes in the international situation, with instability
(D) international trade is facing much greater risk than domestic trade
(E) international trade is long and wide, many intermediate links
(F) the international market is more than a commercial war, the competition is extremely fierce