Here is a compilation of essays on ‘Foreign Trade’ for class 9, 10, 11 and 12. Find paragraphs, long and short essays on ‘Foreign Trade’ especially written for school and college students.
Essay on Foreign Trade
Essay Contents:
- Essay on the Meaning of Foreign Trade
- Essay on the Types of Foreign Trade
- Essay on the Different Prices in Foreign Trade
- Essay on the Advantages of Foreign Trade
- Essay on the Disadvantages of Foreign Trade
- Essay on the Difficulties of Foreign Trade
Essay # 1. Meaning of Foreign Trade:
When a businessman of a country buys goods from a businessman of another country or sells goods to him, such a business is called Foreign Trade or International Trade. India’s trade with Russia, USA, France, Japan, and Pakistan are the examples of foreign trade.
International trade may be defined as the trade between different countries. Purchase from and sale of goods and services outside the country is called the international trade. It is also known as foreign trade. Foreign trade plays an important role in accelerating the process of economic growth of a country.
Essay # 2. Types of Foreign Trade:
Foreign trade can be divided into the following three categories:
i. Import Trade:
When goods are purchased from a foreign country, it is called import trade.
ii. Export Trade:
When goods are sold to other countries, it is called export trade.
iii. Entrepot Trade:
Sometimes goods are imported from one country with the purpose of exporting them to some other countries, it is called entrepot trade.
Essay # 3. Different Prices in Foreign Trade:
The following are the important price quotations in foreign trade:
i. Laco or Local Price:
It is also known as ex-factory price. It covers the costs of goods plus some profit to the seller. The buyer is expected to bear all expenses for lifting and transporting goods from the factory or warehouse of the seller.
ii. F.O.R. or Free on Rail Price:
It means the loco price together with the cost of carrying goods to the railway station and loading them in the wagons.
iii. F.A.S. or Free Alongside Ship:
It includes all costs and charges for bringing the goods from the factory to the side of the ship. It includes the railway freight but not include the charges of loading the goods on board the ship.
iv. F.O.B. or Free on Board Price:
This price includes all charges upto the loading of goods on board the ship and export duty if any. It is the total of F.A.S. price, ship-loadings charges and export duty.
v. C. & F. or Cost and Freight Price:
This price covers all costs and charges for bringing the goods from the factory to the port of destination, except that of insurance.
vi. C.I.F. or Cost:
Insurance and Freight Price. It includes the cost of goods, freight charges and insurance charges.
vii. Bond Price:
This price includes all expenses upto the transfer of goods to the bonded warehouses.
viii. Franco Price:
It includes all charges and expenses for sending the goods to the place of business of the buyer.
Essay # 4. Advantages of Foreign Trade:
Some of the advantages of foreign trade are as follows:
i. Proper Utilisation of Natural Resources:
Foreign trade facilitates the proper utilisation of natural resource. Countries having abundant natural resources can make the best use of them and by exporting or selling raw materials, manufactured goods or semi-manufactured goods to other countries can expand their business.
ii. Improvement in the Standard of Living:
International trade improves the standard of living of the people living in different countries. The exchange of goods between the countries of the world leads to a higher standard of living.
iii. Availability of All Types of Goods:
Foreign trade provides commodities to the people of a country which cannot be produced economically in that country. It also makes those commodities available which are not produced in a country.
iv. Advantages of Large Scale Production:
It facilitates specialisation of large scale production of goods. Goods are produced not only for domestic consumption but for exports to other countries also. This leads to several economies of large scale production.
v. Export of Surplus Production:
Foreign trade facilitates the export of surplus production. With the existence of foreign trade, surplus production of a country can be exported to other countries. Thus, wastage of resources is avoided.
vi. Stability in Prices:
Foreign trade brings about stability and uniformity in the prices of commodities throughout the world. It is not possible in the absence of foreign trade.
vii. Development of Means of Transport and Communication:
Foreign trade requires best means of transport and communication. For the advantage of international trade, development in the means of transport and communication can be made possible.
viii. International Relations:
With the existence of foreign trade, the people of different countries come in contact with each other. Commercial intercourse amongst different countries of world, facilitates the exchange of ideas and culture. This promotes cordial relations and understanding among the nations of the world.
ix. Security from Natural Calamities:
Natural calamities such as floods, famine, drought, etc. affect the production of a country adversely. Due to increased means of transport and communication, foreign trade ensures the adequate supplies of those commodities which are in short supplies within the country at the times of such natural calamities.
Essay # 5. Disadvantages of Foreign Trade:
Some of the disadvantages of foreign trade are as follows:
i. Mis-Utilisation of Natural Resources:
Export of natural resources may exhaust the natural resources of a country and may restrict the growth of home industries.
ii. Import of Harmful Goods:
Import of intoxicated goods, luxury items, etc. adversely affects the well-being of the people and the economy.
iii. Economic Dependence:
The underdeveloped countries of the world have to depend upon the developed countries which leads to economic exploitation.
iv. Shortage of Goods:
Sometimes the traders, to earn the foreign exchanges, export the essential commodities required in a country. It results in shortage of goods in the home country.
v. Difficulties during Wars:
Dependence of foreign goods creates a crisis in the event of war. During wars or when healthy relations do not prevail between the countries, many hardships may follow.
vi. Unhealthy Competition:
Foreign trade allows the developed countries to carry unhealthy competition with the underdeveloped countries. It creates rivalry between different nations of the world.
Essay # 6. Difficulties in Foreign Trade:
There are many difficulties which are faced by a trader engaged in foreign trade.
They are discussed as follows:
i. Distance:
Foreign trade involves long distances. Distance between various countries of the world makes it difficult to establish quick and close trade contacts between the buyers and the sellers. Hence distance between the different countries of the world is a great difficulty in foreign trade.
ii. Different Languages:
Different languages are spoken and written in different countries of the world. This diversity of language creates another problem in the foreign trade. Price-lists and catalogues are to be prepared in foreign language. All correspondence has to be done in foreign language. So the trader, wishing to establish trade relations with foreigners, must know the language of that country.
iii. Greater Risk:
In foreign trade, as the goods are to be transported to a long distance, they are exposed to greater risk. Goods are transported by ships which may sink due to gales or hidden rocks. The ships and the goods may be captured by the enemies. These risks may be covered through marine insurance, but this increases the cost of goods.
iv. Difficulties in Transport and Communication:
Long distances in foreign trade create difficulties of proper and quick transport and communication. Receiving the goods or their supply takes longer time and also involves large expense which increase the cost of goods.
v. Difficulties in Payments:
Each country has its own currency which makes difficult to get the payment of the price of the goods sold. Exchange rates are determined for different currencies for this purpose. But exchange rates go on fluctuating. Thus, payments in foreign trade create problems.
vi. Restrictions:
Foreign trade is subject to a numerous restrictions. Tariffs, Quotas and exchange regulations restrict the foreign trade.
vii. Lack of Personal Contact:
In foreign trade, the transactions are made with the unknown persons through the medium of correspondence and communication. Direct and personal contract between the buyer and the seller does not exist. In the absence of direct contact, it becomes difficult to obtain information regarding the credit worthiness and financial position of the persons living in foreign countries.
viii. Study of Foreign Markets:
Every foreign market has its own characteristic features, for example, its requirements, customs, capacity, traditions, etc. Thus, an extensive study of foreign market is required for the success in foreign trade.