QUESTION 18. What are the reasons for foreign trade?
Answer 18. REASONS FOR FOREIGN TRADE
1. AVAILABILITY OF LARGER VARIETY OF GOODS : Foreign trade enables a country to obtain the articles which cannot be produced at home or which can be produced only at very high cost. A country which is unable in producing goods due to certain natural or physical and other limitations, such as , climatic conditions, can imports the required goods from other country.
2. EXPORT OF SURPLUS PRODUCTION : Surplus production can be easily exported to those countries where there is demand of those goods e.g India has every year a large surplus of raw cotton and raw jute which she export to Japan, U.K , U.S.A and other foreign countries.
3. ADVANTAGE OF DIVISION OF LABOUR : A country produces only those goods for which it has advantages of division of labour. It can produce only those goods which it can produce most cheaply, and it avoids the production of the article which it can produce only at a high cost.
4. ABILITY TO FACE NATURAL CALAMITIES : One of the important advantage of foreign trade is that it is helpful in avoiding natural calamities whenever drought famine , earthquake etc are faced by a country, the country facing such calamity can import goods from other foreign countries.
5. PROMOTING INTERNATIONAL PEACE : Foreign trade helps the countries to maintain peace between them by inter-changing their ideas which strengthens the bond of unity and contributes to cultural advancement. For example INDIA AND AMERICA.
6. HIGHER STANDARD OF LIVING : Due to more gain from foreign trade , it is possible for exporting countries to raise their standard of living.