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Foreign Trade and Integration of Markets

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  • Last Updated : 18 May, 2022

Globalization implies coordinating the economy of a country with the world’s economy to work with the free progression of exchange, capital, people, and innovation across borders.It is a process of connection and reconciliation among individuals, organizations, and legislatures of various countries, an interaction is driven by global exchange and speculation and helped
by data innovation.

Foreign Trade and Integration of Markets

Trade is a financial idea that arrangements with trading of products. Exchange is led between at least two gatherings i.e. people or business elements. Trades are of 2 types- Internal trade and International trade :

Internal trade 

It refers to the exchange of goods and items within the boundary of a nation meaning the exchange happens between two entities of the same country and the money and profit remain in the country itself.

International trade 

There is import and export of goods and items across various nations and borders i.e the goods may not be produced in the same country but is been used by other countries and apart from some tax, the profit belongs to the producer of that particular good or item.

TRADE

Foreign trade refers to the exchange of capital, goods and services across international boundaries. For example – Indian companies sell their products in other countries like Russia, America, China and also other countries’ products are being sold in India.

Integration of markets and Integration of product creation is imperative to get the course of globalization and its effect. Products go starting with one market then onto the next when trade is opened between nations. Foreign trade opens up scope for the makers of one country to reach past their homegrown business sectors. Makers can sell their products and contend in business sectors situated in different nations completely different from business sectors situated inside its country. One approach to growing the selection of merchandise for the customers is the import of products created in one more country past what is locally delivered.

Since prior times, foreign exchange has been interfacing the various nations. Early shipping lanes helped in interfacing Asia with the remainder of the world. These shipping lanes worked with the development of merchandise, and exchanging interests pulled in different exchanging organizations like the East India Company was drawn in towards India. Foreign trades not only help producers but also buyers and consumers.

Advantages of foreign trade

  • Foreign trade sets out freedom for makers to reach past the homegrown business sectors and contend in business sectors situated in different nations of the world.
  • Essentially, the purchasers have more selection of products, past locally delivered goods. With the kickoff of exchange, merchandise goes starting with one market then onto the next and the selection of merchandise in the business sectors rises. 
  • Costs of comparable products in the two business sectors will more often than not become equivalent.
  • Also, makers in the two nations contend with one another even though they are isolated by a huge number of miles

Indian Imports

India imports various kinds of products that are created across the world. India’s major exports included petroleum products, gems and jewellery, drug formulations, electrical apparatus, atomic hardware, natural synthetics, plastic things, composts, iron and steel things, optical and clinical instruments, vehicles and adornments, iron and steel, valuable and semi-valuable stones and so forth.

Due to imports and exports, various factors of the economy gets affected like GDP(Gross Domestic Product), Exchange Rates and Interest Rates, Inflation etc.
 

Disadvantages of foreign trade:

  • Commonly homegrown ventures of developing nations need to confront extreme rivalry which radically impacts their Growth rate.
  • Developed nations sell their excess merchandise in the unfortunate nations at lower cost with the goal to harm local businesses of economically weak countries. This is called Dumping.
  • While agricultural nations trade more fundamental merchandise then it brings about the lack of those fundamental products for homegrown utilization. 
  • One of the significant disservices of global trade is that on multiple occasions, social contrasts are rarely reported.
  • The more extensive an item is dispersed, the more probable that it very well might be wrongfully replicated by a contender. This can be as exclusive data or market marking

Example: Overtaking of Chinese toys and electronic items in India

Import of low-cost items and fair quality items by developing nations increments reliance on foreign nations because of which the creation inside the nation. This reliance expands loads of troubles for the developing nations. Chinese toys have the opportunity to get to Indian business sectors because of the opening up of trade ties between India and China.

Due to this trade, toys have become less expensive in the Indian business sectors. For Indian purchasers, there is more decision when buying toys. Notwithstanding more prominent decisions the costs are lower.
In light of new plans and less expensive costs, Chinese toys have acquired prevalence in the Indian business sectors,
and today 70 to 80 per cent of the toy shops sell Chinese toys and Indian toys have been supplanted. Because of fierce opposition from Chinese toys, Indian toys have lost their homegrown market, consequently confronting misfortune.

Sample Questions

Question 1: “Integration of the world happens with the help of foreign trade”. Explain.

Answer: 

Foreign trade gives open doors to the two makers and purchasers to reach past the business sectors of their own nations. Merchandise head out starting with one country then onto the next. Rivalry among makers of different nations as well as purchasers wins. In this way, foreign trade prompts the incorporation of business sectors across nations. For instance, kids in India have the choice of picking either Indian toys or Chinese toys. So this gives a chance to grow business.

Question 2: Explain the basic characteristics of Foreign Trade.

Answer: 

Foreign trade provides an opportunity for the producers to go beyond the local markets and markets of their own countries.

Question 3: How foreign trade helps producers and consumers?

Answer:

Producers

It creates an opportunity for producers to reach beyond the local markets, and they can sell their products not only in markets located within the country but can also compete in markets situated in other parts of the world.

Consumers

For purchasers or shoppers, the import of products delivered in another nation is one method of growing the selection of products past what is locally delivered.

Question 4: Why is China able to outplay the Indian market in a certain variety of goods?

Answer: 

The reason why China is able to overtake Indian markets in toys and other particular goods are:

  • Less expensive raw materials
  • Cheap labour
  • Improved technology

Question 5: What are the two components of Foreign trade?

Answer: 

The two components of foreign or international trade are

  • Import: It is the purchase or buying of goods or services from any other nation.
  • Export: It is selling of goods or services to any other nation or country.
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