Express the Significance of Foreign Trade.

Foreign trade is acts as a simulator of economic growth of a country. It also helps in optimal Utilization of resources of various countries. The main reasons which make foreign trade important for economy of a country or the significance of foreign trade are:

It helps in expansion of business and in dissolving monopolistic entities, increasing competition. It also encourages product innovation and brings wider availability goods and services to choose from. The modern techniques adopted in business processes help in raising the product quality and standard.

Foreign trade is considered as a simulator of economic growth of a country and helps in optimal utilization of resources of various countries. For the perspective of host country, foreign investment helps in expansion of employment opportunities and enables better utilization of manpower and other resources. Multinational companies also help in expansion of domestic suppliers.

The modern techniques adopted in business processes help in raising the product quality and standard, along with cost-reduction. Foreign investors bring technical and managerial knowledge transfer to under-developed and developing nations. It helps in training and development of manpower and adoption of low-cost operation techniques.

Fluctuations in price level of commodities can be controlled by selectively indulging in foreign trade. For example, if price of a certain commodity rises due to short supply, the same can be imported to level down the increase. Similarly, if price of a commodity fall due to increased supply in the domestic market, the surplus can be exported to elevate the prices to optimal level.

Infusion of foreign capital helps in expanding employment sector. it helps in raising income and investment level in the host country.

Savings, foreign trade, foreign exchange and technology are critical for economic development. Foreign investment helps in economic development by filling savings gaps, trade and technology gaps.

Foreign investment helps in increasing government revenue in form of corporate taxes. It also helps in reducing trade deficit by increase exports and corresponding decrease in imports.

Foreign trade is considered as an important factor determining relationship between countries. Inversely, cordial relationships also help in promoting trade relations and can help in achieving world economic integration and political peace.

Tags: B.Com

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