Foreign Trade SS1 Commerce Lesson Note

International trade /foreign trade refers to the exchange of goods and services across the border of two or more countries by their resident and government.

In other words, it is an exchange of goods and services between people and different countries.

FORMS OF FOREIGN TRADE

1. Bilateral Trade: This takes place when one country agrees to (trade) exchanged goods and services with another country e.g. Nigeria and Japan.

2. 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 agreements with countries such as America, Russia, China, Britain etc. 

INVISIBLE IMPORTS

These are services provided by other countries e.g. banking, insurance, shipping, transportation etc.

EXPORT TRADE

Is the selling of a country’s products abroad i.e. selling one country’s product to other countries.

Export includes goods and services to other countries. Export can be visible or invisible.

1. Visible Export: are tangible goods sold to other nations. Nigeria’s exports are agricultural products and mineral resources. These are sold overseas without being processed e.g. crude oil, cotton, palm oil, etc. 
2. Invisible Export: services sold to other countries – invisible export cannot be seen or inspected e.g. banking, insurance, transports. 

BARRIERS TO INTERNATIONAL TRADE

1. Currency differences: Differences in currency are a barrier because they involve two or more currencies, changes in exchange rates and non-availability of foreign currencies hinder the flow of goods.

2. Artificial barrier: Imposition of duties like tariffs on imported goods creates strict regulations and tariff limits the extent of foreign trade.

3. Distance: Distance between one country and another and the cost of freight all hinder foreign trade.

4. Cultural problems: Customs and traditions of various countries keep away businessmen and hurt: language differences create communication barriers. 

REASONS FOR INTERNATIONAL TRADE

1. Inequitable distribution of natural resources. Natural resources are not evenly distributed and one country is blessed with more resources than the other.

2. Differences in skill and technical know her countries are more developed than others and this adds differences changes.

3. The quantity and quality of the source. Cost of production: a country imports goods she can even produce locally if their cost is cheaper abroad.
4. The need to expand the local market.

ADVANTAGES OF INTERNATIONAL TRADE

1. It leads to interdependence among nations because no nation is self–sufficient. It is a source of revenue

Equitable redistribution of natural resources.

DISADVANTAGES OF INTERNATIONAL TRADE

1. International trade leads to other entries.

2. It leads to goods.