The advantages and disadvantages of foreign trade

                       DEFINITION 

Foreign trade is one of the major forms of trading. It is called foreign because it is a kind that involves two or more countries. By definition call it the exchange of goods between two or more countries. If you do, you are correct. This kind of trade has two major forms.

1. Bilateral trade: This involves two countries, in which they agree to exchange products and services. It occurs when the parties involved agree to trade. 

2. Multilateral trade: It is a kind of trade in which a country trades with very numerous countries

Having established it's definition let us now establish it's advantages and disadvantages.

    ADVANTAGES OF FOREIGN TRADE 

1. Provision of unavailable products:

Let us cite Nigeria as an example of a country. A country situated in Western Africa. There are very many companies in Nigeria, owned by both Nigerians and foreigners. They produce very different kind of products. Thanks to them, when we go to the market we find them and buy them and make use of them. But then, they are not able to produce every products. There are some products that are not produced in Nigeria. Take the mobile phones as an example. There is no company that produces mobile phones in Nigeria. Now, since there are no companies based in Nigeria that produces mobile phones, they would be unavailable in the country, if Nigerians does not buy it from those who do. Numerous companies produce it outside Nigeria. Traders in Nigeria could engage in trading with them, and purchase mobile phones from them and avail it for sell in Nigeria. If they do, then mobile phones would be available in Nigeria. And that is exactly how mobile phones are made available in Nigeria. That example serves to establish the fact that foreign trade could be used to make goods unavailable in a country available. It is infact an evidence, for just as have been said, it is through foreign trading that trade parties introduces mobile phones into the Nigerian environment. It is a trade between trade parties of different countries. Trading involves buying. So, if I am a trader, or intend to go into foreign trade, I would carry out a market survey about the products to import. Products that are not produced within a country may be a scarce resource. So importing them may profit me, as the few that I avail would be so much valued due to its scarcity, and high demand for it. So I could choose to go to America and buy from them products which they produce their and bring them into Nigeria. Infact, not only the example of mobile phone but of many others who engage in foreign trade helps to support the claim that it has helped to introduce into countries goods that would have been scarce or lacking.

Just think about what it would have been like if there is no such thing as foreign trading. If countries never engage in foreign trading and trading parties withing it never indulge in it, then there environment would be void of products which they buy and import into their country.

2. Promotion of economic development: By engaging in foreign trade, parties gain the skills and knowledge that feccilitates economic development. 

3. Source of revenue: Foreign trade gives the government revenue. For example those who want to import into Nigeria the products they buy, pay taxes to the government. Those who want to export also pay taxes to them. And the traders are usually many. And continues to engage in it. Now when you add up the taxes they pay for importation for certain periods of time, it would add up to a huge sum, thus a huge source of revenue to the government.

4. Provision of employment opportunities: Foreign trades opens many employment opportunities for citizens of a country. One could choose to become an importer for instance. He could buy goods outside his country and sell them in his country. The sell would help him derive revenue, and if he continues it, it becomes a source of income to him. One could also choose to become an exporter. Very many Nigerians make money by buying the products that are made in Nigeria, and exporting them into and selling them to people in other countries. One could also secure employment based of foreign trading by working with any of the established government ministries that collect taxes paid by foreign traders. 

5. Acquisition of skills and ideas: Through this art one could acquire skills that are not within his country. For example if one in a certain country leaves for another to trade, he could learn a lot about how trading is done differently there. He could also draw experience from experienced traders. As he engages in his trade he continues to learn and gain ideas. 

6. Specialization: Countries may choose to use foreign trade to make wealth. For instance if a country has certain resources which other countries lack, which are needed to produce certain products, they could use it to produce it, and sell it at a very expensive cost to them and make huge profit. Infact, they could even choose to specialize in the production of that particular goods. The countries that they produce it to, would be left with no choice but to buy it from them. And due to high patronage from them, due would be an increase in the revenue of that country.

7. Boosts relationship: Foreign trading gives birth to interaction between trade parties. The interaction does not happen just once, but continues to go on and on. As a result of that interaction they may come to have a kind of bond between them. They would understand each other better. They would learn about each other better. 

Since they are trading partners, they may not treat each other badly. Thus they would be at peace. 

8. Increase in standard of living: Because of the fact that many secure wealth through foreign trade, the standard of living of those who do would increase. Not only those who make money through trading but the entire public. One way it would affect their standard of living is that, it would avail to them quality products.

9. Equitable distribution of natural resources: Natural resources which certain countries lack, are obtained by them through foreign trade and used by them. 

10. Enhances investment: Since parties could get products from the countries they trade with, they may be moved to invest their. After all they are at a peace with that country their investment would be secured.

11. Foreign exchange: Parties exchange products with the countries they trade with. This enables the countries to buy whatever they need, that could be traded.  Without which they would not be able to.

12. Economies of scale: International trade brings about economies of scale which results in cheaper goods. 

    DISADVANTAGES OF FOREIGN TRADE

1. It encourages dumping: Countries that buys goods from other countries, may become a place where they dump there products. Instead of producing their own, they may become reluctant to, or infact never produce at all. After all, they have a source of the product. So what may happen is that theyay continue to depend on those countries for the products instead of working towards the production of the products, which is very essential to making them dependent. 

2. Competition with infant industries: The local industries that produce certain items, may become overshadowed by the ones that produces it outside, due to lack of meeting up with a certain quality. The result is that they may lack patronage, as the citizens of the country and even government may neglect them, though they are closer to them, and buy from the ones outside the country that are up to standard. This may make them to treat them as competitors and having them as opponents is not easy because they may not favourably compete with them.

3. Cultural and social alteration: There are certain kinds of products that are not permissible for usage in a country, due to the fact that it's usage affects the culture or morality of the state people's negatively. However due to the fact that there is access to foreign trading, some may choose to buy those products from countries where they are allowed into the country. 

4.Importation of dangerous products: Some exploit the foreign trade. They may choose to import products that are harmful, simply to make money. True importation of them may be against the laws, but they may have fraudulent ways of bringing them into the country. 

5. Creation of balance of payments deficit: When foreign trade becomes too excessive, without restrictions this could occur. It could lead to the end of the reserve, the exchange reserve particularly of a country which may lead to balance of payment issues.

6 Unemployment: While it could enhance employment, there is also ways through which it could lead to unemployment. The countries that buys from others, may choose not to produce theirs. This means their would be no companies that they would build for production. The lack of companies in a country would lead to unemployment as they are usually the major providers of employment in any given country apart from the government, if not even more than them. It is a known fact, that there is usually higher employment opportunities in countries that are very industrialized, but lower in uninsustrialized countries. So, since the country chooses to depend on others for products, instead of producing within, there would naturally be lack of employment opportunities for her citizens.

7. Exploitation: The countries that sells to others could choose to exploit them. They could unnecessarily increase the cost of the products they sell to them, in order to make extreme profits from them. Or they may even demand natural resources that have more value, for exchange. The countries deserving them because they are necessities, and being inadequate to produce it, may have no option but to give in to their demands.

8. Negative impact on self sufficiency: When countries continue to buy from others, they may continue to depend on them. Instead of relying on theirselves or taking the steps to produce and become independent of them, they would continue to become dependent on them. But if they do otherwise, they become sufficient, which would profit them more, economically.