Trade which takes place inside the boundaries of a country is known as internal trade. If trade crosses the four boundaries of a country and trade takes place with other countries of the world, it is known as external trade.

Both in internal and external trade, selling and buying takes place but there are some differences between internal trade and external trade.

Firstly, in the case of internal trade, the produced commodities of a country are sold in different parts of that country. But in external trade, the produced goods of a country cross the boundaries of a country and are sold in another country and the produced commodities of foreign countries enter into our country.

Secondly, the commodities which are sold and purchased in internal trade, do not find place in external trade. The commodities which are produced inside a country may not be demanded by the people of foreign countries. So the commodities which are demanded in foreign countries find place in external trade.


Thirdly, the value of commodities are determined with the help of- currency of that country in internal trade but in external trade value of commodities are determined with the help of exchange rate between the currencies of two countries.

Fourthly, in the case of-internal trade, factors of production like land, labour, capital and organisation are mobile, to get higher income in any part of a country. But it is not possible in the case of external trade. Labourers and capital of a country cannot move easily from one country to another country. So in external trade, there is less mobility of factors but it is more in internal trade.