External Trade its Meaning and Benefit

 External Trade/ International Business defines the dealing of two or more countries in buying and selling of goods and services. It is also termed as trade between two countries or foreign Trade.

The Content covered in this article:

What is External Trade?

Trading globally or trade between two or more nations is known as International Business. Some people are considered it external trade because countries are dealing in goods and services across geographical limits.

This trade includes:

1. Import: When one country buys goods from another country. For example, portable USB desk lamp imported from china, Garlic grater, and cutter, nail art stamps, etc. usually when you visit in the departmental store then you look at these type of products and sometimes salesman give information that these products are imported or made in China and so on.

2. Export: It means selling goods and services to another country. Stitched and unstitched garments are exported from India to Dubai, Cereals like bread, oats, etc. are also exported to UAE. India earned 523902 thousand dollars from UAE by exporting cereals in FY 2017.

3. Entrepot: When one country buys goods or services with the main aim to sell them to another country is termed as an entrepot. It is also known as re-export. For example, India entrepot various chemical products to manufacturing industries all over the world.

Benefits of Foreign Trade

External Trade helps in the expansion and development of the nation. There are various benefits related to it which are as follows:

  1. Foreign Trade helps in earning foreign exchange for import goods and services from other countries.
  2.  Beneficial to those countries which are not capable to produce some goods due to scarcity of resources. In this situation, one country can buy the goods or resources from the other efficient country.
  3. With the help of international business developing and underdeveloped countries can raise the standard of living by using the imported products.
  4. External trade helps in boosting economic growth by creating employment opportunities for export-oriented industries and other industries all over the world.
  5. By import of new updated technology, one country can increase the capacity to produce goods and services at a large level.

Important Note:

Free on Board(FOB) is the contract in which the exporter is responsible and liable to bear all kinds of risks till the delivery of goods on the ship.

Cost and freight(CFR) will also be paid by the exporter.

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