B.Com Ist Year Foreign Trade And Economic Growth Question Answer Study Notes Study material notes Question papers topic wise notes syllabus sample papers chapter wise notes.
Foreign Trade and Economic Growth
B.Com Ist Year Foreign Trade And Economic Growth Question Answer Notes
Q.35. Describe the role of foreign trade in economic development of developing nations.
Or How foreign trade is an obstacle in development of developing countries.(Meerut, 2013)
Ans. MEANING AND DEFINITION OF FOREIGN TRADE NOTES
Foreign trade refers to the trade between two countries Purchaser and seller are citizens of two different countries and are subject to international or bilateral laws of trade and tariffs. Foreign trade is also called International Trade.
Foreign trade plays a vital role in the economic development of a country. If an under-developed country wishes to break the vicious circle of poverty, attain self-sustained growth and transform itself from an agrarian economy to an industrialised one, it will have to import the various requisites of development. Therefore Robertson calls foreign trade an engine of growth’.
IMPORTANCE OR ADVANTAGES OF FOREIGN TRADE STUDY MATERIAL NOTES
The importance of foreign trade can be explained with the help of following points:
(1) Specialisation and Geographical Division of Labour: International trade leads to international specialisation and geographical division of labour. This leads to optimum allocation of world’s resources and makes it possible to use the resources in å most efficient way.
(2) Expansion of Market: The markets of different countries tend to become wider and more extensive with the help of foreign trade. The commodities can be exported even to distant places in bo world.
(3) Improvement in the Production Technique : International trade leads to competition among countries in production and export of goods. The domestic producers will has introduce latest innovations in the methods of production, other they cannot compete with foreign competitors. This results not improvements in domestic industries but also the quality of products.
(4) Proper Utilization of the Factors of Production : In he international trade every country specializes in the production those commodities in which it enjoys the maximum advantage. e production is based on the principle of comparative costs, the untry is able to utilize its productive resources in a proper manner.
(5) Check on Monopoly : Since the home industries have to ce the competition of foreign industries, they cannot set up monopolistic combines to maximize their profits.
(6) Base of Economic Development: Through foreign trade, Developing countries can obtain plant, machinery and equipment, components, raw materials, technical know-how, which are necessary for accelerating economic development.
(7) Increase in Economic Welfare : International trade enables a country to secure goods which it cannot produce at all. Thus, it increases economic welfare of people. Foreign trade not only enables consumers to live, but it also enables them to enjoy a variety of goods.
(8) Control on Inflation : Foreign trade helps a country to solve its problem of scarcity of raw material and food through imports and thus help to control the rapid increase in prices.
(9) Moderanisation of Industries : Foreign trade plays a vital role in the evolution of the modern society. Specialisation and large-scale production, introduction of elaborate capital instruments and exploitation of natural resources as petroleum and rubber would hardly have been possible without international trade.
(10) Increase in National Income and Employment : There becomes increase in the national income and employment with the help of foreign trade. As a result of division of labour and specialisation, total output increases and each trading country gains rom it. International trade enables a country to specialise in the production of those goods for which it is best suited. It leads to increase in national income and employment opportunities in the country.
DISADVANTAGES OF FOREIGN TRADE STUDY NOTES
- Adverse Effect on the Growth of Domestic Industries: westic industries, particularly new and infant industries, de adversely affected due to foreign competition.
- Leads to Dumping : Under free trade, the developed countries often resort to dumping of their goods in underdeveloped ries which does irreparable damage to their economies.
- Unbalanced Growth of the Economy : Beca international trade, there is international specialisation acco to which a country may specialise in the production of hig products. This led to the development of export oriented indust, and other sectors of the economy remain backward.
- Exhausting of Resources: A country’s resources mayo exhausted due to large and continuous exports. Then she willen forced to depend upon other countries for imports.
- Exploitation by Multinationals : Free trade will lead to the ruthless exploitation of the poor, backward, and underdeveloped countries by the foreign multinational companies retarding their economic growth altogether.
- International Rivalry and Conflicts : International trade may sometimes lead to international rivalry and conflicts among nations, instead of promoting international co-operation. This led to the exploitation of poor and weak nations.
- Discourages Self-sufficiency and Self-reliance : Because of foreign trade, a country depend upon other countries for one or another goods. Thus, it discourages self-sufficiency and self-reliance.
- Unrestricted Imports of Harmful Commodities: Free trade results in the import of injurious or harmful commodities, such as, narcotics, opium, hashish, etc. which do irreparable damage to the health and morals of the people.
- Increase in Demonstration Effect : People of under developed countries come into contact with the people of developer countries with the help of foreign trade and are affected by their way of living. They start using imported luxurious items.
- Scarcity of Goods in the Country : Devel countries export huge part of production to earn foreign exc. This create scarcity of goods and cause inflation in the county.
Short Answer Questions
Q.1. Discuss the advantages of foreign trade.
Ans. See Page 142 and 143.
Q.2. Discuss the disadvantages of foreign trade.
Ans. See Page and 44.143