Commerce,SS 1, Week 3
Topic: Divisions of Foreign Trade
Contents:
- Divisions of Foreign Trade
- Barriers or problems associated with international trade
Division of Foreign Trade
Foreign Trade can be divided into import, export and entreport
Import Trade
Import trade can be defined as the act of buying goods and services from other countries. It involves purchase of goods and services from a foreign country.
Import Trade is subdivided into :
- Visible imports: this consist of goods that can be seen and touched.i.e tangible goods which come from other countries.
- Invisible import: invisible imports consist of services that cannot be seen o touched and are rendered by other countries. Examples are: banking, aviation, insurance etc.
Export Trade
Export Trade is the act of selling goods and services to other countries of the world. It is the selling of a country’s products abroad. Export trade can also be divided into
- Visible Export: This consist of goods which can be seen and touched and are sold in other countries. Example is the goods from Nigeria that are sold in USA. Example of such goods are cocoa, crude oil, textiles etc.
- Invisible Export: This consists of services rendered to other countries. Such services include consultancy services, tourism, insurance etc.
Entrepot it is a form of foreign trade where the goods that are shipped into one port are subsequently re exported and shipped to another port. It is simply the re-exporting of goods imported from another country.
Problems associated with International Trade
Some of the problems associated with International trade are as follows
- Political instability: The frequent change in Government policy has always bring about changes in international policy, this therefore serves as a threat to international trade.
- Distance:The cost of money spent on transportation from one country to another is another barrier and problem to international trade.The risk of loss and damage since most merchants do not always take insurance policy.
- Documentation:There are too many documents are involved in international trade. This documents require extra finance and personnel, thereby causing delay in the transaction process.
- Difference in currency: Fluctuations in exchange rate may work against the volume of transactions as well as non-availability of foreign currency.
- Difference in weights and measurement: The issue of weights and measures creates a problem of conversion from imperial to metric system
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