Foreign Trade is an Engine of Economic Growth in a Country. What are the Other Advantages of Foreign Trade.
It is true that foreign trade is an engine of economic growth in a country. The well-being of a country is determined by the nature and extent of its foreign trade. A country can easily acquire goods that it cannot produce or cannot produce economically, with the help of foreign trade. Different resources like men, money, materials, machines are needed in order to produce goods and services.
No country is self-sufficient with the resources that they possess and a difference is always there in the quality and quantity of resources possessed by various countries. Foreign trade rose because of this difference in the relative abundance or shortage of resources in various countries.
Other Advantages of Foreign Trade
Utilization of resources:
National resources possessed by every country get exploited due to the economic development of the country. Foreign trade helps in using such resources in a best possible way. For example, India has sufficient offshore oil resources, but lack in technology and machinery. Such items can be imported from developed countries like USA, Japan etc.
Equalization of prices:
Prices are equalized throughout the world because of foreign trade. Import level increases with the increase in the prices of commodities in order to check the rise in prices. If prices of products decline, export counter acts the trend.
It helps in generating employment in a country as foreign trade facilitates the growth of agricultural and industrial activities.
Harmonious relationship between countries:
Foreign trade helps in promoting harmonious and cordial relationship among various countries. It is so because a country which is self-sufficient in certain items can provide them to other countries experiencing shortage of those goods.
Facilitates economic development:
With the help of import and export, it is possible to achieve economic development and rapid growth of national income. Some countries like UK, Japan have achieved a higher economic growth rate because of imports of raw materials and export of manufactured goods.
Specialization and efficiency of production:
It leads to specialization in productive activities undertaken by various countries. Some countries can produce goods economically than other countries. Such countries can specialize in the production of such goods and can acquire the goods of their need in exchange for those goods. For example, India can produce coffee, tea, sugar etc, in abundance. Similarly, Iran, Libya etc, can produce crude oil, petroleum in abundance.