Distinguish between vertical trade and horizontal trade.

Vertical Trade

Horizontal Trade

1. When items of trade are component parts of a machinery the trade is said to be vertical.

2. Here a country imports a part of goods from another country to use it as a raw material for the production of its own goods and then exports its own good to another country. The sequence only ends when the final good reaches its destination.

3. We import computer parts from Japan and then after assembling them we manufacture a computer. It is then exported to some African countries. It is an example of vertical trade.

1. When items of trade are finished goods it is called horizontal trade.

2. Here the items of export or import are only the finished goods and not the component parts e.g., We import cars or metro-train bogies from foreign countries, it is horizontal trade with those countries.

3. Cycle are manufactured in India. Every part in manufactured in the factory, parts are assembled within the factory. Complete bicycle comes out of the country. The exporters then export these cycle to African countries. It is an example of horizontal trade.