Difference between international trade and regional trade
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there are several reasons to believe the classical view that international trade is fundamentally different from inter-regional trade.

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1. Factor Immobility:
ADVERTISEMENTS:
The classical economists advocated a separate theory of international trade on the ground that factors of production are freely mobile within each region as between places and occupations and immobile between countries entering into international trade. Thus, labour and capital are regarded as immobile between countries while they are perfectly mobile within a country.
There is complete adjustment to wage differences and factor-price disparities within a country with quick and easy movement of labour and other factors from low return to high sectors. But no such movements are possible internationally. Price changes lead to movement of goods between countries rather than factors. The reasons for international immobility of labour are—difference in languages, customs, occupational skills, unwillingness to leave familiar surroundings, and family ties, the high travelling expenses to the foreign country, and restrictions imposed by the foreign country on labour immigration.
The international mobility of capital is restricted not by transport costs but by the difficulties of legal redress, political uncertainty, ignorance of the prospects of investment in a foreign country, imperfections of the banking system, instability of foreign currencies, mistrust of the foreigners, etc. Thus, widespread legal and other restrictions exist in the movement of labour and capital between countries. But such problems do not arise in the case of inter-regional trade.
2. Differences in Natural Resources:
ADVERTISEMENTS:
Different countries are endowed with different types of natural resources. Hence they tend to specialise in production of those commodities in which they are richly endowed and trade them with others where such resources are scarce. In Australia, land is in abundance but labour and capital are relatively scarce. On the contrary, capital is relatively abundant and cheap in England while land is scarce and dear there.
Thus, commodities requiring more capital, such as manufactures, can be produced in England; while such commodities as wool, mutton, wheat, etc. requiring more land can be produced in Australia. Thus both countries can trade each other’s commodities on the basis of comparative cost differences in the production of different commodities.
3. Geographical and Climatic Differences:
Every country cannot produce all the commodities due to geographical and climatic conditions, except at possibly prohibitive costs. For instance, Brazil has favourable climate geographical conditions for the production of coffee; Bangladesh for jute; Cuba for beet sugar; etc. So countries having climatic and geographical advantages specialise in the production of particular commodities and trade them with others.
4. Different Markets:
International markets are separated by difference in languages, usages, habits, tastes, fashions etc. Even the systems of weights and measures and pattern and styles in machinery and equipment differ from country to country. For instance, British railway engines and freight cars are basically different from those in France or in the United States.
Thus goods which may be traded within regions may not be sold in other countries. That is why, in great many cases, products to be sold in foreign countries are especially designed to confirm to the national characteristics of that country. Similarly, in India right-hand driven cars are used whereas in Europe and America left-hand driven cars are used.
5. Mobility of Goods:
There is also the difference in the mobility of goods between inter-regional and international markets. The mobility of goods within a country is restricted by only geographical distances and transportation costs. But there are many tariff and non-tariff barriers on the movement of goods between countries. Besides export and import duties, there are quotas, VES, exchange controls, export subsidies, dumping, etc.

Image Courtesy : ustr.gov/sites/default/files/amf-boat.jpg
1. Factor Immobility:
ADVERTISEMENTS:
The classical economists advocated a separate theory of international trade on the ground that factors of production are freely mobile within each region as between places and occupations and immobile between countries entering into international trade. Thus, labour and capital are regarded as immobile between countries while they are perfectly mobile within a country.
There is complete adjustment to wage differences and factor-price disparities within a country with quick and easy movement of labour and other factors from low return to high sectors. But no such movements are possible internationally. Price changes lead to movement of goods between countries rather than factors. The reasons for international immobility of labour are—difference in languages, customs, occupational skills, unwillingness to leave familiar surroundings, and family ties, the high travelling expenses to the foreign country, and restrictions imposed by the foreign country on labour immigration.
The international mobility of capital is restricted not by transport costs but by the difficulties of legal redress, political uncertainty, ignorance of the prospects of investment in a foreign country, imperfections of the banking system, instability of foreign currencies, mistrust of the foreigners, etc. Thus, widespread legal and other restrictions exist in the movement of labour and capital between countries. But such problems do not arise in the case of inter-regional trade.
2. Differences in Natural Resources:
ADVERTISEMENTS:
Different countries are endowed with different types of natural resources. Hence they tend to specialise in production of those commodities in which they are richly endowed and trade them with others where such resources are scarce. In Australia, land is in abundance but labour and capital are relatively scarce. On the contrary, capital is relatively abundant and cheap in England while land is scarce and dear there.
Thus, commodities requiring more capital, such as manufactures, can be produced in England; while such commodities as wool, mutton, wheat, etc. requiring more land can be produced in Australia. Thus both countries can trade each other’s commodities on the basis of comparative cost differences in the production of different commodities.
3. Geographical and Climatic Differences:
Every country cannot produce all the commodities due to geographical and climatic conditions, except at possibly prohibitive costs. For instance, Brazil has favourable climate geographical conditions for the production of coffee; Bangladesh for jute; Cuba for beet sugar; etc. So countries having climatic and geographical advantages specialise in the production of particular commodities and trade them with others.
4. Different Markets:
International markets are separated by difference in languages, usages, habits, tastes, fashions etc. Even the systems of weights and measures and pattern and styles in machinery and equipment differ from country to country. For instance, British railway engines and freight cars are basically different from those in France or in the United States.
Thus goods which may be traded within regions may not be sold in other countries. That is why, in great many cases, products to be sold in foreign countries are especially designed to confirm to the national characteristics of that country. Similarly, in India right-hand driven cars are used whereas in Europe and America left-hand driven cars are used.
5. Mobility of Goods:
There is also the difference in the mobility of goods between inter-regional and international markets. The mobility of goods within a country is restricted by only geographical distances and transportation costs. But there are many tariff and non-tariff barriers on the movement of goods between countries. Besides export and import duties, there are quotas, VES, exchange controls, export subsidies, dumping, etc.
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International trade is part of a trade between nations. Regional trade happens within the country.
Explanation:
- International Trade carried with nations where the exchange of goods and services conducted.
- International trade allows countries to expand their markets for goods that are not available domestically.
- Regional trade carried within the country where goods exchange between states.
Learn More:
Difference between inter regional and international trade
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