Why do countries carry out international trade?
- Differences in natural resource endowments. Different countries have different natural resource endowments in form of minerals, forests etc. Therefore there is need for counties to specialize and exchange in order to get what they do not have through international
- Lack of self-sufficiency in terms of goods and services. No country can satisfy all her needs therefore countries trade together in order to get what they cannot produce locally.
- Need for foreign exchange. There is need for international trade for countries to acquire foreign exchange which can be used for import purposes.
- Need to dispose of the surplus output. Some countries produce more than what they .can consume, therefore there is need to sell off the excess output to other countries in order to avoid resource wastage.
- Need for specialization. There is need for specialization among countries in the production and exportation of commodities that they can produce at lower costs than other countries and import commodities that they can produce at high cost hence international trade.
- Need to promote international relations among countries through international trade. In addition, some countries need international trade in order to further their political economic ideologies.
- Differences in tastes and preferences among citizens of different countries. Some citizens prefer imported better quality products to the poor domestically produced goods. Therefore there is need for international trade in order to acquire such products.
- Need to import modern technology and capital. Some countries have natural resources but lack enough capital and technology to exploit them. Therefore there’s need for international trade for such countries to acquire capital and technology to full utilize their resources.
- The vent for surplus theory of international trade. This theory states that opening up of world markets through international trade encourages the use of formerly idle resources in countries. This theory explains how international trade creates an out let for the use of some resource possessed by some countries for export purposes.
CATEGORIES Economics
TAGS Dr. Bbosa Science
