question_answer

Classify trading centres into two categories. How are they different from each other? Explain.

Answer:

Trade may be categorised into two types:
(a) Bilateral Trade: Bilateral trade is done by two countries with each other. They enter into agreement to trade specified commodites amongst them. For example, country A may agree to trade some raw material with agreement to purchase some other specified item to country B or vice-versa.
(b) Multi-lateral Trade: As the term suggests multi-lateral trade is conducted with many trading countries. The same country can trade with a number of other countries. The country may also grant the status of the "Most Favoured Nation" MFN on some of the trading partners.
Difference between Bilateral and Multi-lateral Trade:
Bilateral Trade		Multi-Lateral Trade
1.	Bilateral trade is the exchange of commodities between two countries.	Multi ? Lateral Trade is the exchange of goods of services among a number of countries.
2.	Here only commodities are exchange e.g., one country providing raw material and the other manufactured goods in exchange.	Here goods and services are bought or sold in terms of value.
3.	Here commodities of two countries are complementary.	Here raw material, finished goods and services, all becomes items of trade. The trade is not complementary but supplementary.
4.	This type of trade is possible only to a limited extent of certain commodities.	This type of trade is trade based on which has no limit for same commodities only.