Foreign Trade Experts affirm that the definition of foreign trade is the exchange, transactions, sales (export), or purchases (import) of goods, intermediate goods, raw materials, final products, or services between 2 or more countries or between regions and blocks. They are regulated by international institutions or bilateral or multilateral treaties upon reaching a mutual agreement.
Today, the concept of foreign trade, international treaties, and free trade agreements encompasses many sectors and areas beyond the import and export process.
For this reason, in this text, we also explain how foreign trade works with current examples and an in-depth analysis of the context in which economies with the world develop.
Basic Concepts Of Foreign Trade
Customs. A state agency in charge of intervening in the international traffic of merchandise, monitoring and supervising its passage through the country’s borders, applying the legal and regulatory norms related to import, export, and other customs regions.
Characteristics Of Foreign Trade
It must be unspoken that commercial opening, foreign trade, and international business and customs generate opportunities. Still, if you do not have the necessary knowledge, skills, and experience, you may not benefit.
When you export a product to a specific country, that product has to be of the highest quality at an affordable price. When you meet these conditions and characteristics, you can compete worldwide, adding, of course, impeccable logistics as well as suitable international trade and logistics depending on each region. It is recommended to study and delve into the logistics of foreign exchange.
Strengths as a country or region have to be identified focus specialize in the sector or products choice for export.
Characteristics For Points
In summary, the characteristics of foreign trade are:
- Relationship, at least, between 2 different countries or regions.
- Whether there is the import process, the export process, or both.
- Seek economic integration.
- Sell abroad the country in what is internally strong and surplus.
- Buy from abroad what is lacking and needed in the local market or even something more profitable to buy from abroad than to produce it internally.
- That there is domestic and foreign demand
- Production capacity or human and intellectual capital
- Infrastructure that allows adequate logistics, that does not raise international trade costs
- Have a legal apparatus that prioritizes trade facilitation
- Comply with the legal issue for the correct import and export
- To open new markets and increase exports, promotion
- In order not to lose part of the market within the country (domestic trade) due to imports, keep updated and with cutting-edge products and services
Advantages And Disadvantages Of Foreign Trade
These would be the main advantages of the practice of foreign trade making its actions unfavorable:
- Access to quality products and services that may be at a better price
- Creation of employment sources
- Attraction of Foreign Direct Investment FDI
- Staff skills development
- Productivity increase
- Improve competitiveness as a country
- Increase in National Investment
- Infrastructure Development (roads, ports, airports, railways)
- Reduction of the poverty level index
- Economic and social welfare
- Increased government tax collection
- Development of companies complementary to the core industry.
- economic spill
- access to technology
- Foreign trade operational advice is require with lawyers, accountants, advisors, a specific firm, or a professional who has studied foreign trade, international trade, And also relate areas and offers their service. Having experience in management and foreign trade service companies with intelligence.
Some disadvantages of foreign trade would be:
- If the demand in another country drops or an event arises that harms the country where the products are export, scorn the fact that the exporting country’s economy is doing well internally, did could generate many problems due to these external factors.
- Endanger the continuity of any company either due to internal or external factors
- Costs for certifications and licenses as AEO. Including very high legal requirements to be certified.
- On the issue of health, if a product enters that does not meet the health requirements, And also it could endanger the health of the population
- The theme of flora and fauna, harm by some plague
- Harming the ecosystem by exploiting natural resources or any particular animal species
- counterfeit products
- Goods damaged during transport
- delivery times
- Wages not necessarily well paid
- Trade tensions, trade wars, protectionism, and tariff impositions. According to the World Trade Organization, “from October 2018 to mid-May 2019, the value of trade affected by restrictive import measures is estimate at US$339.5 billion. Is the second-highest figure on record, after the US$588.3 billion collected in the previous report (mid-October 2017 to mid-October 2018).” Which affects the global economy and, of course, the countries directly involved.
Benefits And Importance Of Foreign Trade
Talking about the benefits that flow from foreign trade activity is closely linked to the importance of foreign trade and international trade in transforming people’s lives.
The advantages of foreign trade have been mention (without forgetting the digital and online). From there, the benefits emerge. And also specifying the benefits it generates. It is possible to understand its importance. Still. If some help had to be state because it is the most outstanding. And also it would be the generation of jobs through the attraction of foreign investment.
Because By Increasing Your Potential Market.
Jobs that would not exist if such products were not ship abroad. If you only had the local market without the foreign need, production would be lower. And also but when you export a particular good or service. These production increases are sometimes linked to increasing the labor force.
And in the case of importation, quality products are access at a reasonable price and that due to the conditions or the environment could not be produce or obtain . Without forgetting that importing And also intermediate goods and raw materials can generate work by using them to create a good end.
Today the Free Trade Agreements generate chapters that open the possibility of sharing information, And also which is not a minor issue for more accelerate development and growth of a specific industry or economy
Foreign Trade Examples And Success Cases
The World Economic Forum WEF (or WEF for its acronym in English) reveal a study in which it state that in 1993, 60% of the population of Vietnam lived in poverty, And also by 2014 it fell to less than 14%, leaving poverty 40 million people.
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Review What Is Foreign Trade And How It Works?.