Foreign Trade Definition | Free Economic Blogs
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Foreign Trade Definition
Foreign Trade Definition
According to Wasserman and Hultman, “International Trade consists of transactions between residents of different countries”.
According to Anatol Marad, “International trade is a trade between nations”.
According to Eugeworth, “International trade means trade between nations”.
Meaning of Foreign Trade
Foreign Trade is trade between the different countries of the world. It is called as International Trade or External Trade.
International trade is referred to as the exchange or trade of goods and services between different nations. This kind of trade contributes and increases the world economy. The most commonly traded commodities are television sets, clothes, machinery, capital goods, food, and raw material, etc.,
International trade has increased exceptionally that includes services such as foreign transportation, travel and tourism, banking, warehousing, communication, advertising, and distribution and advertising. Other equally important developments are the increase in foreign investments and production of foreign goods and services in an international country. This foreign investments and production will help companies to come closer to their international customers and therefore serve them with goods and services at a very low rate.
All the activities mentioned are a part of international business. It can be concluded by saying that international trade and production are two aspects of international business, growing day by day across the globe.
Foreign trade is exchange of capital, goods, and services across international borders or territories. In most countries, it represents a significant share of gross domestic product (GDP). While international trade has been present throughout much of history, its economic, social, and political importance has been on the rise in recent centuries.
- Microeconomic Definition | Historical Review of Microeconomics
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- Importance of Microeconomics
Features of International Trade
(i) Separation of Buyers and Producers:
In inland trade producers and buyers are from the same country but in foreign trade, they belong to different countries.
(ii) Foreign Currency:
Foreign trade involves payments in foreign currency. Different foreign currencies are involved while trading with other countries.
(iii) Restrictions:
Imports and exports involve a number of restrictions but by different countries. Normally, imports face many import duties and restrictions imposed by importing country. Similarly, various rules and regulations are to be followed while sending goods outside the country.
(iv) Need for Middlemen:
The rules, regulations, and procedures involved in foreign trade are so complicated that there is a need to take the help of middlemen. They render their services for smooth conduct of trade.
(v) Risk Element:
The risk involved in foreign trade is much higher since the goods are taken to long distances and even cross the oceans.
(vi) Law of Comparative Cost:
A country will specialize in the production of those goods in which it has a cost advantage. Such goods are exported to other countries. On the other hand, it will import those goods which have cost disadvantages or it has no specific advantage.
(vii) Governmental Control:
In every country, government controls the foreign trade. It gives permission for imports and exports may influence the decision about the countries with which trade is to take place
