Differentiate between Multilateral Trade System and Bilateral Trade System.

Multilateral Trade System.

In a Multilateral Trade System several nations bear trade relations amongst themselves. It is based on the assumption that all countries must have a global view of use of resources. This type of trade ensures that available resources with any given nation are put to best use. Thus crude oil may be ample in some countries and scare in other. The multilateral trade system, ensures that commodities can more from place of ample production to other countries where such commodity is unavailable or cannot be produced.

This type of trade system can be considered as a free market system, with no real physical boundaries as far as movement of goods is considered. In other words, trading of goods is done freely amongst the participating nations. Thus goods may be produced/manufactured in a given country but may compete freely with goods other goods in any other country. In this type of trade system, free flow of goods is not restricted.

Bilateral Trade System.

A bilateral trade System involves trade relations between two countries. It has been widely used as a mechanism to promote trade between two different nations having common trade interests. In this type of trade system, two countries enter into a mutual agreement with regards to trade mechanism. The agreement may carry detail like trade volume, goods to be traded and stage-wise time for the contract