Importance of foreign trade

Foreign trade helps in development of the participating countries and is important for the participating countries in following ways:

Enables availability of wider range of goods: Expansion of business and presence of large number of players helps in dissolving monopolistic entities and increases competition. It also encourages product innovation and brings wider availability goods and services to choose from. The modern techniques adopted in business processes help in raising the product quality and standard.

Better utilisation of country's resources: Foreign trade is considered as a simulator of economic growth of a country. It helps in optimal utilisation of resources of various countries. For the perspective of host country, foreign investment helps in expansion of employment opportunities and enables better utilisation of manpower and other resources. Multinational companies also help in expansion of domestic suppliers.

Helps in reduction of production cost: The modern techniques adopted in business processes help in raising the product quality and standard, along with cost-reduction. Foreign investors bring technical and managerial knowledge transfer to under-developed and developing nations. it helps in training and development of manpower and adoption of low-cost operation techniques.

Enables price stability: Drastic changes in price level of commodities can be controlled by selectively indulging in foreign trade. For example, if price of a certain commodity rises due to short supply, the same can be imported to level down the increase. Similarly, if price of a commodity fall due to increased supply in the domestic market, the surplus can be exported to elevate the prices to optimal level.

Provides greater employment opportunities: Infusion of foreign capital helps in expanding employment sector. It helps in raising income and investment level in the host country.

Helps in economic development: Savings, foreign trade, foreign exchange and technology are critical for economic development. Foreign investment helps in economic development by filling savings gaps, trade and technology gaps.

Increased contribution to government revenues: Foreign investment helps in increasing government revenue in form of corporate taxes. It also helps in reducing trade deficit by increase exports and corresponding decrease in imports.

Helps in establishing relationships between countries: Foreign trade is considered as an important factor determining relationship between countries. Inversely, cordial relationships also help in promoting trade relations and can help in achieving world economic integration and political peace.

Subcribe on Youtube - IGNOU SERVICE

For PDF copy of Solved Assignment

WhatsApp Us - 9113311883(Paid)