International trade /foreign trade refers to the exchange of goods and services across the boarder of two or more countries by their resident and government. In other words, it is exchange of goods and services between people and different countries.
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FORMS OF FOREIGN TRADE
- Bilateral Trade: This takes place when one country agrees to (trade) exchanged goods and services with another country e.g. Nigeria and Japan
- Multilateral Trade: This is the buying and selling of goods and services among countries. It occurs when each nation buys and sells with whatever country it wishes to track with e.g. Nigeria has multilateral agreement with countries as America, Russia, China, Britain etc.
These are services provided by other countries e.g. banking, insurance, shipping, transportation etc.
Is the selling of a country’s products in abroad i.e. selling of one country product to other countries.
Export includes goods and services to other countries. Export can be visible or invisible.
- Visible Export: are tangible goods sold to other nations. Nigeria exports are agricultural product and mineral resources. These are sold to overseas without being processed e.g. crude oil, cotton, palm oil, etc.
- Invisible Export: are services sold to other countries – invisible export cannot be seen or inspected e.g. banking, insurance, transports.
BARRIERS TO INTERNATION TRADE
- Currency differences: Differences in currency is a barrier because it involves two or more currencies change in exchange rate and non availability of foreign currencies hinder the flow of goods.
- Artificial barrier: Imposition of duties like tariff on imported goods create barrier strict regulation and tariff limits the extent of foreign trade.
- Distance: Distance between one country and another and the cost of freight all hinder foreign trade.
- Cultural problems: Customs and traditions various countries keep away businessman and have negative impact on foreign trade.
- Difference in language: language differences creates communication barrier.
DIFFERENCE BETWEEN DOMESTIC AND FOREIGN TRADE
|DOMESTIC TRADE||FOREIGN TRADE|
|1. It is a trade within the boundary of a country||Trade with other countries|
|2. Same currency is used to transact business||Different currencies used for business|
|3. Same weight and measures are used||Different weight and measures are used|
- Both are facilitated by aids to trade
- Both involve buying and selling
- Currencies are used in both trade
- Both are division of trade
IMPORT TRADE: is the buying and selling of goods and services from other nations. It can be grouped into visible and invisible imports.
VISIBLE IMPORTS: They are physical or tangible goods purchased from other countries. It include capital and consumer goods e.g. Automobiles, equipment machinery, electronics, clothes etc.
REASONS FOR INTERNATIONAL TRADE
- Inequitable distribution of natural resources. Natural resources are not evenly distributed and one country is blessed in a particular resources than the other.
- Differences in skill and technical know her countries are more developed than others and this add to differences in products produced and the need for exchanges.
- The quantity and quality of labour force.
- Cost of production: a country imports goods she can even produced locally if their cost cheaper abroad
- The need to expand local market.
ADVANTAGES OF INTERNATIONAL TRADE
- It leads to interdependence among nations because no nation is self – sufficient
- It is a source of revenue
- Equitable re-distribution of natural resources
DISADVANTAGES OF INTERNATIONAL TRADE
- International trade leads to exploitation of poorer countries
- It leads to dumping of goods
- Visible imports