Foreign trade and why people engage in it

                       DEFINITION 

There is a kind of trading that is known as foreign trade. It involves the buying and selling of goods and services between parties from two different countries. The parties could be individuals or governments. The second name for this kind of trading is; ''international trade''. 

There are three kinds of this kind of trading. The import, export and entrepot. 

1.Import: This involves buying and selling from other countries into another. It is the trading that involves buying into a country goods from countries that produces it, either by an individual or governments. This is done in other to meet local demands. It is necessary because of lack or scarcity of the products imported. Since it is not available in the locality, it has to be bought and brought into the country. Any who engages in this kind of foreign trade is called an importer.

2. Export: It is the opposite of import. While import means buying and bringing into a country products, export means selling a product to people from other countries. 

3. Entrepot: It is the process of importing goods from other countries so that they would be re-exported into other countries. They also call this kind of trading re-export trade. 

        CHARACTERISTICS OF FOREIGN TRADE 

1. It is a trade that involves parties from different countries. And the law applicable to every nation on currency is that the currency of that nation must be used for purchasing within the nation. Therefore those who engage in foreign trading makes use of the currency of the country of their parties. For instance if a Nigerian wants to engage in importation, he would have to buy goods in America with the United States Dollars.

2. It is also a trade that involves parties from other countries. Usually foreign trade is a business that is done by people from different countries. One of the parties may be a Nigerian. He may choose to buy from an American. It is different from home trades, in that most of those who engage in home trades are usually within that country. 

3. Goods are moved beyond geographical boundaries: The products purchased are not kept within the country, but instead are either exported into other countries by the party that bought it, or imported. That is why goods are usually moved beyond the boundaries of the product producers. 

4. Different weights and measures are used, due to the fact that each of the country involved have different standards and measures for products. The standard for measuring the value of a product in America may differ from Nigeria's. So when in America, a partner would measure it based on that standard, but when he brings his product into Nigeria, he measures the value based on the Nigeria's standards to determine how to sell it.

5. Participation in foreign trade requires very many documentation. Those who want to engage in it are expected to fill many forms to receive authorization by government.

  THE REASONS FOR FOREIGN TRADE 

There are many reasons why people indulge in this kind of trading. It is so as to derive certain benefits. 

1. To improve standard of living: Some countries may lack certain products. Or the ones they have within is inferior. Because they lack or the ones in their possession is inferior, it simply does not quench their throat for superior or qualify ones. They desire products that are of standard. They do not have it. But, there are countries that produces it. In other to introduce products that have quality, they engage in foreign trade; by buying those and introducing them into their market. When they do, individuals can have access to them, and buy them and use them. 

2. For uneven distribution of natural resources: The truth is that no country has every natural resources. Some have many, but usually lack some. The countries that lack, use foreign trade to derive the natural resources that they have. They exchange the ones they have, with the ones others have. Foreign trade ensures distribution of resources. 

3. To introduce products that are lacked: Some products are not produced within a country. This leads to lack of it. The lack of it, increase its value and desire. Traders, exploit on this lack, by engaging in foreign trade to buy products that are unavailable and monetize them. When they sell them, they usually derive lots of revenue from them. The more they sell, the more they make revenue.

4. For profit and revenue: Trade parties engage in foreign trade for the purpose of deriving profit. It is a kind of trading after all, and no trade can be without profit. They make money through foreign trade by buying goods outside the country and selling them in the country that they imported it to. When the sell, they derive revenue for the products.

Governments also utilize foreign trade as a source of revenue. For instance, they charge traders fees for importing and exporting. There are usually many traders. And so they fees that they would pay for every importation usually adds up to a large amount.

5. Expansion of markets for products: Parties engage in foreign trade in other to introduce more of a certain products in the market and thus boost the market. 

6. To boost relationship: Sometimes governments engage in foreign trading in other to make more strong, their relationship with other countries. States are usually friends with the parties they trade with. They would not want to have any conflict with them. Instead as a business man treats his customer, so do they treat their parties. So, governments sometimes may choose to engage in foreign trade with a country as a way of making peace with them.

7. Difference in weather: Weather is one of the factors that gives birth to foreign trade. Let me talk you how. The truth is that the weather of countries differs. This difference affects their products. For instance it may affect the crops they would produce. Some countries may easily produce certain agricultural products, that other countries may lack. This may make those inadequate to want to trade with countries that are successful in other to meet up with their needs for such products. 

8. There is usually a difference in the method of production in a country. Some countries may like the way a certain country produces their product. The may choose to patronize them because of this reason, to derive that value.

9. Technological reasons: Countries do not have the same strength when it comes to technology. Some countries have less, but others more. The countries that are technologically advanced are able to engage in mass production at a very low rate, and be able to sell them to those that are inadequate in technology. Their inadequacy in technology necessitates dependence of them on the countries that are efficient, thus they would want to buy from them. 

10. To create employment: One of the reasons why parties engage in foreign trade is to create employment. For instance those who engage in importation of goods, may establish outlets and pay others to sell for them.

11. Difference in the efficient use of natural resources: Some countries are very efficient when it comes to the use of natural resources. Others may not be too good at this. They may decide to sell their resources to those good at using natural resources to produce goods.

12. Skill differences: Citizens may develop special skills in the production of a commodity. And this may earn it reputation. Because of that, countries that have less skilled persons, may want to trade with them for the efficient production of commodities.