The Benefits of Foreign Trade
Foreign Trade is defined as the buying and selling of goods internationally. The outflow of goods from a
country is termed as Export while the inflow of goods is called Imports. Sometimes, the goods are
imported for processing operations and then exported, this process is called Entrepot.
Importance of Foreign Trade:
Foreign trade plays a vital role in the development a state. The inflows or outflows of goods and services
not only provide satisfaction of scarce resources, but also increase the GDP of a country. Here are some
of the important key points of foreign trade:
Division of Labor:
Countries rich in natural resources requires skilled manpower for the development maneuvers. For this
purpose, labor can be traded with developing countries (constituting of cheap labor) or the raw
materials can be sent to the countries with high labor force. The manpower in the developed states are
very costly. Hence, multinational companies outsources their manufacturing units to the third world
countries.
Resources, Allocation and Utilization:
Foreign trade helps in the eradication of the surplus resources. The supplementary resource can be
exported to another country for monetary values. Similarly, the scarce resource can be imported from
another country to fulfill the needs of a society. A country can increase its economy by channelizing its
exports for higher returns.
Price Stability:
Usually, the products imported have lower prices than locally produced goods. Also, the goods are
imported in accordance of the demand of a product. This causes stabilizing the prices at a marginal level.
Variety of Products:
Consumers get a wide variety of goods from all over the world. This also helps in the culmination of
monopoly and lowering the prices because of global competition. Customers can choose from several
options according to their predilections. Because of much rivalry, the quality standards of products are
amplified.
High Standard of Living:
Importing goods increase the living standards of societies. Foreign trade gives access to the finest
products with optimum qualities and sublimely prices.
Employment Opportunities:
With the agility of labor and resources, ample of employment opportunities are generated. It specifically
helps the emerging states. Also, service industries gets much prospects because of outsources units.