International trade refers to trade between two different countries (such as India and Bangladesh) or one country and the rest of the world (e.g., India and Great Britain, Germany, U.S.A., etc.). The former is called bilateral trade and the latter multilateral trade.

Domestic trade or internal trade represents the trade that takes place between the different regions of the same country (e.g., the trade between Calcutta and Mumbai or Calcutta and Chennai, etc.). It should be noticed that there are some points of similarities between these two kinds of trade.

All trade, whether domestic or interna-tional, arises from specialisation. As one region of a country brings the goods from other regions to make up the deficiencies, one country tries to bring goods and services, in which it has deficiencies, from other countries.