Foreign trade

Importance of foreign trade to a nation Name University Date Importance of foreign trade to a nation Foreign trade also Inter-Regional trade or International trade is trade between different countries. It involves exports and imports. Foreign trade is important as it mutually benefits the countries involved. This puts the nations involved in the global marketplace and result in division of labor and specialization at international level. Nevertheless, foreign trade enhanced the progress of nation`s economy and advanced technology. Basically, foreign trade leads to better and effective utilization of natural resources, develops a broad range of market for nations` products, results in uneven distribution of resources, contributes to the well being of the nations involved, and is considered a boon in meeting natural misfortunes (Kottler & Keller, 2013). This paper seeks to discuss the importance of foreign trade to a nation. Foreign trade is important to a nation in numerous ways. It leads to the development of market for nation`s products and better natural resource utilization. Nations involved in foreign trade often benefit in terms of the well being of their citizens. Foreign trade plays a vital role in a nation`s economic development. This makes it important to a nation. Foreign trade helps in producing comparatively cheaper commodities in terms of cost than others leading to less production cost. Where many nations employ such production mechanism in producing their goods, goods at lower prices will be made available. Foreign trade also widens the market scope of a nation due to both foreign and domestic demand of the product of a nation. This leads to a mass production. The price of products declines where there is an increase in production of goods with a declining average cost (Krueger, 2002). Every nation values own product. A nation uses its product to acquire the products it needs from another nation through foreign trade. In this case, foreign trade is important to a nation in that it enables a nation to acquire different varieties of products in both qualitative and quantitative terms. In this regard, economic development of a nation is assured. For example, steel and iron industry was established because of the stored coal and iron ore. However, the establishment of the industry required import of technical knowledge. Without foreign trade, the industry would be too expensive and difficult to establish in India. Every nation experiences its own consumer challenges. In the event of consumer goods scarcity, nations import goods from other countries while keeping product price stable so as to enable people access their commodities. Economic development is prone to retard where foreign trade is not available. Therefore it is very important for a nation to get involved in foreign trade (Kottler & Keller, 2013). It is important to note that foreign trade as mentioned earlier entails exports and imports or services and merchandise. In the current economic development environment, foreign trade is inevitable for the growth of a nation as well as a nation`s development. Some of the major reasons for the importance of foreign trade to a nation include: reducing the burden of foreign debts through earning the nation foreign exchange from imports payment; contributes to the nation`s national income and revenue; stabilizes economy and improves standard of living through increasing competition leading to reduced commodity prices; widens and expands domestic products` market resulting in better profits and price; gratifies the varying wants and tastes leading to people living happily; and generates activities for economic development (Vedovato, 2006). Foreign trade is also important to a nation in that it: encourages specialization at international level through the use of capital efficiency, natural resources and special facilities, and efficiency of man power; aids in importing technology and capital goods which increases efficiency and modernizes industries; provides for industrial production and expand opportunities for employment; equalizes commodity process among nations through moving goods form where they are plenty to where they are not available in order to match demand with supply; makes use of the resources available; leads to large scale of production and expands market resulting in benefits of economies of scale, makes commodities available through distributing and sharing resources that are scarce; and distributes inventions to other countries leading to development of the developing nations (Chishti & Katholieke, 2005). There is a greater need for foreign trade to a nation. In addition to the above mentioned importance of foreign trade, a nation benefits from foreign trade in numerous ways. The following are some of the benefits accrued from foreign trade: 1 Specializations and division of labor: at the international level, foreign trade results in specialization and division of labor. Nations with much natural resources import finished goods and export raw materials. 2 Optimum utilization and allocation of resources and utilities: wastage of resources can be avoided and lines that are unproductive eliminated due to specialization. This leads to rational utilization and allocation of resources due to foreign trade at international level. 3 Equality prices: foreign trade stabilizes prices. It keeps the supply and demand curves at equilibrium. This results in stable prices. 4 Offer help in the event of natural calamity: foreign trade provides help to a nation in the event of natural calamities through importing medicine and food grains. This helps during famines, earthquakes, and floods in the affected areas. 5 Maintain a position of balance of payment: every nation seeks to maintain its position for balance of payment. This happens when a nation gets involved in foreign trade via imports and exports (Vedovato, 2006). 6 Earn nations goodwill and brings reputation: foreign trade earns nation goodwill in the international market. This happens when a nation exports quality goods. 7 Promote peace in the world: foreign trade builds good relations among countries. This is because of the transfer of commodity and technology assistance from one nation to the other. Economic relations also bring nations together. Foreign trade results in friendly atmosphere and promotes peace in the world. 8 Availability of numerous commodity choices: a wide range of consumer choices are provided by foreign trade. A new variety of commodities are made available all over the world. 9 Ensure availability of standard and quality goods: standard and quality goods are produced. This is due to the competitive nature of foreign trade. Increasing and maintaining demand and supply for goods makes nations keep up good quality of ...