International trade: Play or get played

With the economies of the world working at large in synchronicity with each other globalisation of trade is an inevitable step. The trade practices among countries is however a slippery surface because the world is a place of numerous different practices and everyone has different sensibilities. Not only this but also the customs and laws that govern every nation are varied to much extent and it is a tedious task in itself to balance things or at least keep them on the same page.

Trade is the biggest factor that has driven the need to explore uncharted territories since historical times. The Britishers came to India for trade, before that the Mesopotamians were already indulged in trade with our country and took the exotic spices. The britishers traded with us for cotton, tea and spices and developed industry with our raw material.

However that was the time now long bygone. Now every country that is involved in trading with other countries has a stable or feeble government and is governed by the law of land and the other countries have to abide by that law if it wishes to continue its trading relation with that country.

Nevertheless the International trade is also monitored by the International Chambers of Commerce to check any irregularities in maintaining the regular and free flow of trade. With the changing practices of trade credit instruments such as standby letter of credits have taken up a vital spot in the international trade.

Such instruments are a buyer’s bank’s guarantee to the seller’s bank assuring them that the payment will be made to them. This clears out the buyer and seller from the huge complexity of different legalities of both the trading nations.

These letter of credits are the new era’s vital business instrument and are closely monitored by the internal and international agencies to check any frauds at large. Different instruments are used in different cases. A letter of credit may guarantee a payment on a promised date where as a standby letter of credit is not actually meant for the purpose of payment and if in case a payment is made by the bank for that, it indicates that something was not foreseen and a mistake was made.

The bank usually makes a clear estimate of the profit to be made by the deal and only on its satisfaction that if everything goes well the buyer will clear the payment once the transaction is over. Thus the situation has changed in a way and is still similar in the other.

On one hand the countries are still exploring others for trade but now that every country has its own policy for it they have to play by their rules. The basic thing is that international trade is a way of asserting power and vice versa. The powerful gets to turn the dice in favour of it own set of conditions and the less powerful has to wait for its turn to change the game.