The Importance of Foreign Trade

The Importance of Foreign Trade

The exchange of good and services is critical to human development because people possess different skills training and resources For example some people excel in farming Others are good miners while some have perfected their artistry skills In this scenario each person would trade the surplus of his products to another person in exchange for what he does not have creating balance and harmony in society This kind of trade also happens on an international level More specifically countries trade with each other based on market agreements national resources and the skill set their people possess The technical name for trading with other nations is foreign trade This trade is critical to the survival of nations as trade among people is critical to the survival of the individual. Here are reasons to show the importance of foreign trade

Increase in local productivity

The greatest ambition of any business is to make as make profit as possible by reaching more clients than it already has Doing so is difficult when a business operates within the confined space of national borders Foreign trade erases these borders making it possible for a simple business in the US to reach a wide market in the UK and vice versa Businesses increase their output levels when energized by the possibility of expanding their client base This increased output leads to localized benefits such as an increased demand for local labor raw materials and other inputs such as energy In the end everyone in the nation benefits when a single local business accesses a foreign market

Increased access to scarce national resources

The distribution of resources in the world is not even Some countries have an abundance of a particular kind of resource while others are abundant in another type of resource Foreign trade allows these nations to exchange such resources in a civil structured and fair manner For example the US exports about $131.1 billion worth of space and aircraft materials in 2018 The US produces these products well and other nations need them so the US exports them Conversely the US does not have certain resources in abundance and as such it must import them For example chocolate factories in the US cannot make chocolate without cocoa beans from countries in Africa and South American For example in October 2018 the US imported cocoa beans worth $117.89 million from different nations in the Southern Hemisphere of the world

Promotion of peace prosperity and interdependence

Different countries go to war for different reasons including religion ideology and economic disputes However most countries tend to avoid wars as much as possible because it might interfere with their trade practices For instance no one would like to see a war erupt in any country that imports his products because that war would mean reduced income for the exporter War in a country that is rich in resources also means importing those resources becomes difficult For this reason people tend to agitate for peace because they do not want it to interfere with foreign trade Therefore foreign trade is critical for international peace and security