“Nonetheless, the developing countries must be able to reap the benefits of foreign trade”

“Nonetheless, the developing countries must be able to reap the benefits of foreign trade”

“Foreign Trade”

When goods and services are exchanged or traded within the boundaries or one country, it is called “Home Trade” and if the same exchange or trade involves two or more different countries then it is known as “Foreign Trade”. Some countries get specialized in the production of particular items and others are granted by natural resources. (e.g.) Saudi Arabia has the stock of oil, England has steel or iron and Africa has gold etc. Many countries are considered send and get the placed order of goods according to their need.

Foreign trade enlarges the market for a country’s output. According to Robertson it is an “engine of growth”. It increase domestic output and earns foreign exchange (Forex) for the country. It helps in the economic growth of country. The purchases from other countries are imports and sales to other countries are exports.

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“When there is any dealing in goods or services between two or more countries, it is foreign trade”

Causes of Foreign Trade

Every country cannot produce everything which it requires, so it has to import it from other countries

It creates better relationships among different countries

With the help of the theory of comparative cost, a country can specialize in one or two commodities and export them to other countries to earn profit and imports those goods which it cannot produce cheaply.

It helps in getting the advantage of division of labor

It causes of acquaint with the culture of other countries.

It broadens the market of a country’s products

It help in raising the standard of living