The below points clarify the need and significance of foreign trade to a nation:
1. Division of Labour and Specialisation: Foreign trade leads to division of labour and specialisation at the world level. Some countries have plentiful natural wealth. They should distribute raw materials and import finished goods from republics which are progressive in skilled manpower. This gives profits to all the states and thus leading to separation of labour and specialisation.
2. Optimum Allocation and Utilisation of Resources: Due to specialisation, uncreative lines can be removed and waste of resources sidestepped. In other words, resources are channelized for the construction of only those properties which would give maximum returns. Thus there is balanced distribution and utilisation of resources at the international level due to foreign trade.
3. Equality of Prices: Prices can be stabilised by foreign trade. It supports to keep the request and supply location stable, which in turn stabilises the prices, making payments for transport and other marketing expenses.
4. Availability of Multiple Choices: Foreign trade benefits in providing a better choice to the consumers. It supports in making obtainable new changes to consumers all over the world.
5. Ensures Quality and Standard Goods: Foreign trade is highly modest. To preserve and raise the request for goods, the exporting states have to retain the quality of goods. Thus, quality and standardised goods are produced.
6. Raises Standard of Living of the People: You must keep in mind that imports can enable standard of living of the people. As people can have a choice of new and better changes of goods and services. By overriding new and better diversities of goods, people can increase their standard of living.
7. Generate Employment Opportunities: Foreign trade supports in making employment chances, by increasing the mobility of labour and resources. It makes direct service in import sector and indirect employment in other sector of the economy. Such as Industry, Service Sector (insurance, banking, transport, communication), etc.
8. Facilitate Economic Development: Imports assist in economic development of a nation. This is because with the import of capital goods and knowledge, a country can make growth in all sectors of the economy, i.e. agriculture, industry and service sector.
9. Assistance during Natural Calamities: During natural disasters for instance earthquakes, floods, famines, etc., the exaggerated countries face the problem of scarcity of essential goods. Foreign trade allows a country to import food grains and medicines from other countries to support the affected people.
10. Maintains Balance of Payment Position: Every country has to continue its balance of payment position. Ever since, every country has to import, which marks in discharge of foreign exchange, it also deals in trade for the inflow of foreign exchange.
11. Brings Reputation and Helps Earn Goodwill: A country which is complicated in spreads earns kindness in the global market.
Example: Japan has received a lot of goodwill in global markets due to its exports of feature electronic goods.
12. Promotes World Peace: You must understand that foreign trade takes countries closer. It enables handover of technology and other assistance from established countries to emerging countries. It brings various countries faster due to economic relationships arising out of trade agreements. Thus, foreign trade generates a friendly atmosphere for sidestepping wars and conflicts. It endorses world peace as such countries attempt to preserve friendly relationships among themselves.
