Skip to content

International Trade, Benefits and WTO Class 11 Notes

questionbuddy.in/cbse/class-11/business-studies/international-business/international-trade-benefits-and-the-wto

Business StudiesCBSE Class 11 · International Business

International Trade Class 11: Export, Import, Benefits to Nations and Firms, and the WTO

Updated 17 October 2026 · Fact-checked

International trade is the buying and selling of goods and services between countries: exports (selling abroad), imports (buying from abroad) and entrepot trade (importing to re-export). It differs from internal trade in nationality of parties, mobility of factors, customer heterogeneity, laws, risks, currencies and documentation. It brings foreign exchange, efficient use of resources and higher profits. The WTO, set up on 1 January 1995 with its headquarters in Geneva, frames the rules of trade.

Notice that exports and imports flow in opposite directions, entrepot trade imports goods only to re-export them, and the WTO's rules cover all of it.

Illustration drawn for QuestionBuddy.

Understand International Trade: How It Differs from Internal Trade, Benefits and the WTO (CBSE 11)

Meaning. International trade is the buying and selling of goods and services between countries. It consists of exports (selling abroad), imports (buying from abroad) and entrepot trade (importing goods in order to re-export them, sometimes after processing).

Why countries trade. Natural resources are unequally distributed, and countries differ in labour productivity, skills, technology and costs, so each gains by specialising in what it produces efficiently and importing the rest.

Difference from internal trade. In international trade: the nationality of buyers and sellers differs; mobility of factors (labour and capital) between countries is restricted; customers differ in tastes, languages and habits; business systems, laws and regulations differ, with tariffs and quotas; political risks are higher; different currencies are used and exchange rates fluctuate; documentation and formalities are heavier; distances and time are longer.

Benefits to nations. (1) Earning foreign exchange for capital goods, technology and essentials; (2) more efficient use of resources; (3) better growth prospects and employment; (4) a higher standard of living through variety.

Benefits to firms. (1) Prospects of higher profits because prices may be higher abroad; (2) increased capacity utilisation and economies of scale; (3) prospects of growth in large foreign markets; (4) a way out of intense domestic competition; (5) an improved business vision, with a global outlook.

World Trade Organisation (WTO). The international organisation that deals with the rules of trade between nations. Established on 1 January 1995 as successor to the General Agreement on Tariffs and Trade (GATT, 1948), with headquarters in Geneva; India is a founder member.

  • Objectives: raise standards of living and ensure full employment and growing real income; expand production of and trade in goods and services; use world resources optimally in line with sustainable development; ensure that developing countries, especially the least developed, get a fair share in the growth of world trade; reduce tariffs and other trade barriers and eliminate discrimination; provide a forum for negotiations and a dispute settlement mechanism.
  • Functions: administering trade agreements, acting as a negotiating forum, handling trade disputes, monitoring national trade policies and giving technical help to developing countries.

International Trade: How It Differs from Internal Trade, Benefits and the WTO (CBSE 11): key facts

Parts of international trade
  • export is selling abroad
  • import is buying from abroad
  • entrepot is import for re-export
Trade between countries.
Why it differs
  • nationality
  • factor mobility
  • customer heterogeneity
  • laws and tariffs
  • political risk
  • currency
  • documentation
Compared with internal trade.
Benefits
  • foreign exchange
  • efficient use of resources
  • growth and employment
  • higher standard of living
  • higher profits
  • capacity use
  • growth
  • way out of competition
  • business vision
First four to nations, rest to firms.
WTO
  • established 1 January 1995
  • successor to GATT 1948
  • headquarters Geneva
  • India is a founder member
Rules of trade between nations.

How to answer International Trade: How It Differs from Internal Trade, Benefits and the WTO (CBSE 11) questions

For comparison or benefit questions, first decide whether the benefit is for the nation or for the firm.

  1. 1Define the type of trade: export, import or entrepot.
  2. 2For internal versus international differences use the basis list: nationality, factor mobility, customers, laws, risk, currency, documents.
  3. 3Sort benefits into nation-level (foreign exchange, resources, employment, standard of living) and firm-level (profit, capacity, growth, competition, vision).
  4. 4For numericals compute capacity utilisation = output / capacity and fixed cost per unit = fixed cost / output.
  5. 5For WTO state the date, the predecessor, the headquarters and the matching objective.

International Trade: How It Differs from Internal Trade, Benefits and the WTO (CBSE 11) in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Re-exporting goods

Suppose a trading hub imports raw cashew nuts from several countries, processes and packs them, and then sells them to buyers in a third continent.

What kind of trade is this?

Try it first, then show the solutionSolution
  1. Goods are imported and then re-exported after processing.
  2. That is entrepot trade.

Answer: Entrepot trade.

Memory hook: Entrepot means in and out again.

Tricks to remember International Trade: How It Differs from Internal Trade, Benefits and the WTO (CBSE 11)

Short memory aids. Say each one aloud once, then use it on a question the same day.

  • Export out, import in

    Export leaves the country, import enters; entrepot enters and leaves.

    Use it when: Definitions.

  • Nation or firm

    Foreign exchange and employment help the nation; profit and capacity help the firm.

    Use it when: Benefits.

  • 1995 Geneva, GATT before

    WTO began on 1 January 1995 in Geneva after GATT (1948).

    Use it when: WTO facts.

International Trade: How It Differs from Internal Trade, Benefits and the WTO (CBSE 11): solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Entrepot trade · 1 mark · MCQBoard level

Entrepot trade means
(a) selling goods abroad
(b) buying goods from abroad
(c) importing goods to re-export them
(d) trade within a country

Try it first, then show the solutionSolution
  1. Entrepot trade involves importing goods and re-exporting them, sometimes after processing.

Answer: (c) importing goods to re-export them

Example 2: Export, import and entrepot · 3 marks · Short answerBoard level

Define export trade, import trade and entrepot trade, with one example of each. (3 marks)

Try it first, then show the solutionSolution
  1. Export trade: selling goods or services abroad, for example selling tea to another country.
  2. Import trade: buying goods or services from abroad, for example buying machinery from another country.
  3. Entrepot trade: importing goods in order to re-export them, sometimes after processing, for example importing raw nuts, processing them and selling to a third country.

Answer: Selling abroad; buying from abroad; importing to re-export.

Example 3: Capacity and fixed cost · 4 marks · Short answerHarder board level

Suppose a firm has a capacity of 10,000 units a year and sells 6,000 units domestically at 180 each. Variable cost is 100 per unit and fixed cost is 3,00,000. It starts exporting 3,000 units at 200 each. Find the capacity utilisation, fixed cost per unit and profit before and after exporting. (4 marks)

Try it first, then show the solutionSolution
  1. Before: utilisation = 6,000/10,000 = 60%; fixed cost per unit = 3,00,000/6,000 = 50; profit = 6,000 x (180 - 100) - 3,00,000 = 4,80,000 - 3,00,000 = 1,80,000.
  2. After: units = 9,000, utilisation = 90%; fixed cost per unit = 3,00,000/9,000 = 33.33 (rounded).
  3. Export contribution = 3,000 x (200 - 100) = 3,00,000, so profit = 4,80,000 + 3,00,000 - 3,00,000 = 4,80,000.
  4. The benefits shown: increased capacity utilisation, economies of scale and higher profits.

Answer: Utilisation 60% to 90%; fixed cost per unit 50 to 33.33; profit 1,80,000 to 4,80,000

Example 4: WTO and fair treatment · 5 marks · Case-basedHOTS / competency

Case: A country raises its import duty sharply on one trading partner's goods while charging a lower duty on the same goods from others. The affected partner, a developing country, complains that its share in world trade is shrinking. (5 marks)
(i) State the date and the predecessor of the WTO. (2)
(ii) Which WTO objectives are relevant to the complaint? (2)
(iii) Where can the dispute be taken? (1)

Try it first, then show the solutionSolution
  1. (i) The WTO was established on 1 January 1995 as the successor to the General Agreement on Tariffs and Trade (GATT, 1948).
  2. (ii) The objectives to reduce tariffs and other trade barriers and eliminate discrimination, and to ensure that developing countries get a fair share in the growth of world trade.
  3. (iii) The WTO provides a forum for negotiations and a dispute settlement mechanism among members.

Answer: (i) 1 January 1995; GATT (1948). (ii) Eliminate discrimination and a fair share for developing countries. (iii) The WTO dispute settlement mechanism.

Example 5: Nation or firm · 4 marks · Short answerHarder board level

Classify each benefit as a benefit to a nation or to a firm. (4 marks)
(a) Earning foreign exchange (b) Selling abroad uses spare capacity (c) A wider variety of goods and services for citizens (d) A way out of intense competition in the home market

Try it first, then show the solutionSolution
  1. (a) Nation: foreign exchange is used to import capital goods, technology and essentials.
  2. (b) Firm: increased capacity utilisation and economies of scale.
  3. (c) Nation: a higher standard of living.
  4. (d) Firm: a way out of intense domestic competition.

Answer: (a) Nation (b) Firm (c) Nation (d) Firm

Where students lose marks in International Trade: How It Differs from Internal Trade, Benefits and the WTO (CBSE 11)

The slips examiners see most often, and what to write instead.

  • Mistake: Treating entrepot as a form of export only

    Ignoring the import step.

    Wrong working

    Entrepot trade is selling domestic goods abroad

    Right working

    It is importing goods in order to re-export them

    Do this: Imports come first.

    Usually costs: 1 mark

  • Mistake: Mixing GATT and WTO dates

    Memorising only one.

    Wrong working

    WTO was set up in 1948

    Right working

    GATT was 1948; WTO was established on 1 January 1995

    Do this: GATT before, WTO after.

    Usually costs: 1 mark

  • Mistake: Listing only the nation benefits

    Ignoring firm-level benefits.

    Wrong working

    Benefits: foreign exchange and employment

    Right working

    Add higher profits, capacity use, growth, escape from competition and business vision

    Do this: Cover both nations and firms.

    Usually costs: 1 to 2 marks

Exam tips

  • Give the basis-wise comparison of international and internal trade in a table.
  • Group the benefits under nations and firms.
  • Write the WTO date, predecessor and headquarters in one line.
  • For capacity numericals show the formula, substitution and the percentage.

Practice questions on International Trade: How It Differs from Internal Trade, Benefits and the WTO (CBSE 11)

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

  1. Q1 · 1 mark · MCQBoard level

    The WTO was established on
    (a) 1 January 1948
    (b) 1 January 1995
    (c) 15 August 1947
    (d) 1 July 2017

    Hint

    Successor to GATT.

    Answer

    (b) 1 January 1995

  2. Q2 · 1 mark · Assertion-reasonHarder board level

    Assertion (A): International trade is riskier than internal trade.
    Reason (R): It involves different currencies, legal systems and political risks.
    (a) Both A and R are true, and R is the correct explanation of A.
    (b) Both A and R are true, but R is not the correct explanation of A.
    (c) A is true, but R is false.
    (d) A is false, but R is true.

    Hint

    Think of exchange rates and laws.

    Answer

    (a) Both A and R are true, and R is the correct explanation of A.

  3. Q3 · 4 marks · Short answerHarder board level

    Distinguish between internal trade and international trade on nationality of buyers and sellers, mobility of factors, customers and currency. (4 marks)

    Hint

    Use the basis list.

    Answer

    Nationality: both parties belong to one country in internal trade, to different countries in international trade. Mobility of factors: free within a country, restricted between countries. Customers: more alike in internal trade; differ in tastes, languages and habits in international trade. Currency: domestic currency in internal trade; different currencies with fluctuating exchange rates in international trade.

  4. Q4 · 4 marks · Short answerHarder board level

    An exporter sells 5,000 units at USD 8 each (assume 80 rupees per USD). In the home market the same units would have fetched 550 each. Export costs (packing, documents, freight and others) are 1,20,000. Find the extra gain from exporting and name the benefit to the firm. (4 marks)

    Hint

    Compare the two sale values and subtract the extra costs.

    Answer

    Export sale = 5,000 x 8 x 80 = 32,00,000. Home sale = 5,000 x 550 = 27,50,000. Extra revenue = 4,50,000; less extra export costs 1,20,000 gives a net gain of 3,30,000. Benefit: prospects of higher profits because prices may be higher abroad.

  5. Q5 · 5 marks · Case-basedHOTS / competency

    Case: A small country depends on imports for fuel and machinery, earns foreign exchange from exporting textiles, and joins the WTO. A textile exporter says exports gave her factory work for most of the year and new customers abroad. (5 marks)
    (i) Which benefits to the nation are shown? (2)
    (ii) Which benefits to the firm are shown? (2)
    (iii) Name the city where the WTO has its headquarters. (1)

    Hint

    Separate nation and firm.

    Answer

    (i) Earning foreign exchange, used to import fuel and machinery; improving growth prospects and employment. (ii) Increased capacity utilisation (work for most of the year) and prospects for growth in foreign markets. (iii) Geneva.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

  1. 1.What is entrepot trade?Show answer

    Importing goods in order to re-export them.

  2. 2.When was the WTO established?Show answer

    1 January 1995.

  3. 3.What was the WTO's predecessor?Show answer

    GATT, the General Agreement on Tariffs and Trade of 1948.

  4. 4.Why do countries trade?Show answer

    Resources and costs differ, so each gains by specialising and trading.

  5. 5.Is India a founder member of the WTO?Show answer

    Yes.

International Trade: How It Differs from Internal Trade, Benefits and the WTO (CBSE 11): frequently asked questions

Are imports and exports both part of international trade?

Yes, along with entrepot trade.

Why are factors less mobile internationally?

Restrictions on the movement of labour and capital between countries.

What do the WTO objectives say about developing countries?

They should get a fair share in the growth of world trade.