In this concept there are mainly two theories that are classical theory of trade and new trade theory each differentiates from each other with different advantages, assumption and drawbacks. Exchange of goods and services on an international level between two or more countries is stated as international trade. Trade generally takes place between different companies it is of different goods and services. An import is goods and services bought by other country for local use. Example: UK imports gold, telecom equipment from India and export is the process of selling the goods and services which the host country has produced in the country more than sufficient. Example: Tea is exported to UK from India. However, government and individual person often buy and sell products and services internationally resulting international trade. Integration of the world economy is more than ever before. We participate in world/global economy by purchasing or selling goods and services in day to day life. Industrial equipments, oil, agricultural products, services like banking transportation, telecommunication, and tourism services are main part of international trade commonly. International transportation and communication cost has been reduced significantly resulting in greater integration between the economies of the world. The interdependence of countries can affect prices, wages, employment, and production in other country; it also affects economic trends and financial condition of each other. For prosperity countries have to work together more closely and rely on each other.

Classical Trade theory:

Classical theory focused mainly on occurrence of trade. The firms felt need of a separate theory due to fundamental differentiation of internal trade. These theories feature the variation in comparative benefit of manufacturing commodities of 2 countries to the diversity in the manufacturing competence of workers in that particular country it is focused on single value prices. Factor price differences are never considered in this theory. There are several sub theories in this particular concept which is explained as followed. (Sinha, n.d.)