International Trade: Meaning, Types, and Benefits Explained

In July 2026, the Philippines traded 22.27 billion USD worth of goods with other countries.¹ Behind that figure are thousands of everyday business decisions: a Cebu furniture maker taking its first export order, a Manila retailer buying electronics from Shenzhen, or a Davao-based freelancer getting paid by an overseas client.

If you're one of those businesses, or studying how they all connect, this guide walks through what international trade means, why it matters, the different forms it takes, and how the process plays out here in the Philippines. We'll also get into what it costs and how to get paid, so keep reading.

What is international trade?

International trade is the exchange of goods and services across borders. When a business sells a product or service to a customer in another country, it is exporting. When it buys something from a supplier abroad, it is importing.

The difference between the value of exports and imports over a particular period is called the balance of trade. When exports are worth more than imports, a country has a trade surplus. When imports are worth more, it has a trade deficit.

The Philippines recorded a trade deficit in July 2026. The country exported 8.15 billion USD worth of goods and imported 14.12 billion USD, producing a 5.97 billion USD gap.¹ That's not unusual for the country. It imports a lot of fuel, machinery, and raw materials, while its biggest exports are electronics and semiconductor components.

International trade vs. international business

People often use the two terms interchangeably, but they're not quite the same. International trade specifically means buying and selling across borders. International business is the broader category, which can include establishing a subsidiary in another country, licensing a product to an overseas partner, or entering into a joint venture.

Every act of international trade is international business, but not every act of international business involves trade.

Why is international trade important?

International trade lets businesses focus on what they can produce efficiently while buying other goods and inputs elsewhere. For a Philippine company, this could mean selling a locally made product to customers overseas or importing machinery that isn't readily available at home.

Consumers can access a wider range of products, while businesses can reach markets larger than their domestic customer base. It also creates jobs tied to exporting and brings in foreign currency that supports the local economy.

None of that comes free of trade-offs, though. A company that relies heavily on overseas customers can be affected by a slowdown in foreign demand. Supply chains can be disrupted by shipping delays, factory closures, or problems with a supplier thousands of kilometers away. Exchange-rate movements can change the peso value of a transaction between the time an order is agreed and when payment arrives.

Types of international trade

International trade takes several forms. The most common are:

• Export trade: Selling goods or services produced domestically to customers in another country.
• Import trade: Buying goods or services produced abroad for use or resale at home.
• Entrepôt or re-export trade: Importing goods to process, repackage, or store before sending them to another country.
• Countertrade: Transactions in which goods or services are exchanged directly, or part of a purchase is settled with goods rather than cash. This can be useful when access to foreign currency or credit is limited.
• Trade under regional agreements: Exchange that happens under a formal bloc like ASEAN, where member countries agree to lower tariffs and simplify customs rules with each other.

How international trade works in the Philippines?

No single process applies to every product, but most international transactions involve several common steps.

• A business typically starts by researching the target market and checking the potential buyer or supplier.
• The parties then agree on commercial terms, including price, payment, and delivery arrangements. The contract may use Incoterms, which define responsibilities for transportation, insurance, delivery, and risk.
• From there, the goods need a tariff classification, the right permits, shipping arrangements, customs clearance, and payment and reconciliation on both ends.

Several Philippine government agencies are involved. The Bureau of Customs handles customs clearance and collects duties and taxes at the border. The Department of Trade and Industry (DTI) develops trade policy and supports exporters. The Philippine National Trade Repository (PNTR) provides information on trade regulations and requirements. The Tariff Commission deals with tariff classification and trade-remedy matters.

Additional regulators may apply depending on the product. Food and pharmaceutical shipments, for example, can involve the Food and Drug Administration. Before accepting an order or importing a product, check the current requirements with the relevant government agency.

Benefits of international trade for Philippine businesses

For a Philippine business, selling or sourcing internationally creates several opportunities:

• A bigger customer base: ASEAN's free trade agreements give exporters preferential tariffs across a market of roughly 680 million consumers.³
• Access to overseas suppliers and inputs: Some components, equipment, and raw materials aren't produced locally at the right price or in sufficient quantities. Importing gives manufacturers access to products they need to operate or expand.
• More diversified revenue: A business selling in several countries isn't dependent on the performance of a single market. If demand weakens in one country, sales elsewhere may help offset the decline.
• Economies of scale: Export orders can increase production volumes. When fixed costs such as equipment and facilities are spread across more units, the per-unit cost can fall.
• Knowledge transfer: Working with overseas buyers or suppliers often means picking up new production standards, quality practices, or technologies along the way.

Costs of international trade from the Philippines

The selling price of an international order doesn't tell you how much money the business will keep. Common costs include:

1. Customs duties and tariffs: Charged on many imported goods, based on the tariff classification and country of origin.
2. Freight and logistics: Ocean, air, or land shipping costs vary depending on volume and urgency.
3. Insurance: Coverage for loss or damage while goods are in transit.
4. Currency conversion and transfer fees: Costs associated with converting pesos into a foreign currency or moving money between countries.
5. Compliance and certification costs: Fees for permits, product testing, or certificates of origin.
6. Agent or broker fees: Paid to customs brokers or freight forwarders who handle documentation and clearance.
7. Warehousing and storage: Expenses incurred while goods are waiting to ship or after they arrive at their destination.

International trade payment methods

The payment method determines when money changes hands and how much risk each side takes. Here's a quick overview:

Advance payment

With advance payment, the buyer pays all or part of the purchase price before the seller ships the goods. It's the safest option for a seller dealing with a new buyer, though it can be a hard sell if the buyer doesn't know or trust the exporter yet.

Letter of credit

A letter of credit involves the buyer's bank committing to pay the seller when the agreed conditions are met and the required documents are presented. It's widely used for larger or first-time transactions because it protects both parties, though it comes with paperwork and bank fees.

Documentary collection

With documentary collection, banks help transfer shipping documents between the buyer and seller in exchange for payment or a commitment to pay. It costs less than a letter of credit, but the seller carries more risk because no bank guarantees payment.

Open account

Under an open-account arrangement, the seller ships the goods and allows the buyer to pay later. Payment terms might be 30, 60, or 90 days. Buyers like this arrangement. Sellers usually only offer it once they trust the relationship, or use trade credit insurance to cover the risk.

Multi-currency account

A business that regularly receives and sends money in different currencies may choose to hold balances in those currencies rather than converting every transaction. For example, a company invoicing customers in USD, EUR and AUD could receive payments in those currencies and convert them when needed. This can reduce unnecessary conversions and simplify monthly reconciliation.

Wise Business: Simplify global trade transactions

For businesses dealing with customers and suppliers overseas, some of the work involved in international trade happens after the sale: receiving payments, converting currencies, paying suppliers, and matching transactions with invoices.

Wise Business is built around this specific problem. It gives businesses local account details in eight or more currencies, so overseas customers can pay as they normally would, and it connects with accounting software.

With a Wise Business multi-currency account, you can access over 8+ local account details — far more currency options than the handful most banks offer. Plus, Wise makes it easy to hold, send, receive, and exchange 40+ currencies from a single account.

With the freedom to send and receive payments in more currencies globally, you can focus on what matters most: growing a local business that knows no borders. Here's what you get with a Wise Business account:

• Obtain account details to receive payments in USD, EUR, GBP, SGD, HKD and more for a one-time fee of 1,400 PHP.
• Zero fees when you get paid via ACH, FAST, InstaPay/PESONet, & other local transfers.
• Send money to pay invoices, suppliers & contractors fast, with less fees
• Always get the mid-market rate with transparent conversion fees starting from 0.57%.
• Pay your bills and ad-hoc overseas expenses using the Wise Business card without hefty foreign transaction fees.
• Seamless integrations with popular accounting software.

➡️Get started with Wise Business today

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Wise Pilipinas Inc. is regulated by the Bangko Sentral ng Pilipinas. You may visit the BSP website for more information about its regulatory framework and consumer protection policies. To reach Wise, visit help center here.

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Sources:

1. PSA Philippine export and import statistics, July 2026
2. University of Washington on the product lifecycle theory
3. ASEAN key figures 2025