Basics of International Trade cover fundamentals: Definition, trade involves exchange of goods and services between countries. Motivation: Comparative advantage (producing at lower opportunity cost), Absolute advantage (producing more with same resources), Factor endowments (differing resource availability), Economies of scale (large-scale production efficiency). Gains from trade: Specialization increases overall production, Consumer choice expands, Prices may fall, Productivity increases. Trade patterns: Intra-industry (same products differently), Inter-industry (different product categories). Balance of payments: Records all international transactions (current account for goods/services, capital account for investments). Exchange rates: Price of currency, affects trade competitiveness, determined by supply-demand in foreign exchange markets. Trade barriers: Tariffs (taxes on imports), Quotas (quantity limits), Non-tariff barriers (standards, regulations). Terms of trade: Ratio of export prices to import prices; improvement means better trade outcomes. Free trade vs. protectionism: Free trade maximizes gains; protection shields domestic industries but reduces efficiency. Regional trade: Bilateral agreements, regional blocs (ASEAN, EU). Indian context: Exports focus (IT, textiles, agriculture), Imports (oil, machinery, chemicals), Trade policy liberalization post-1991. ICAI focus: Comparative advantage, gains from trade, barriers. Exam tip: Comparative advantage comes from opportunity cost differences; remember it differs from absolute advantage.