Discover the multiple benefits that nations can gain from participating in international trade and how it can drive economic growth and stability.The Importance of foreign trade and its developmental role in the economic development of A country, like Pakistan Is well established from the following facts.
How Do Nations Benefit from International Trade?
Benefits of specialisation in production.
Foreign trade, through the Principle of Absolute or Comparative Cost Advantage, can help a country to specialize in the production of those goods for which It has most favorable conditions and depends on the supply of other products of other countries. Even a country deficient In some sources, can cover up Its deficiency through specialization. The Principle of Specialization has universal acceptance.
Benefits of mutual cooperation.
Foreign trade equally benefits developed and under-developing countries. The developed countries are benefitted through an opportunity of disposing of their surplus produce and getting a replacement for their surplus capital and manpower In development programmes of under-developing countries. Similarly, underdeveloping countries are benefited through foreign trade by using the practical experience, technical know-how and expertise of the developed countries In their development programme and thus can accelerate the rate of growth of their economies without wasting time and resources In experiments.
Benefits of mutual-help relationship.
Foreign trade provides ample opportunities to the people of different countries to get together and discuss the problems of the mutual-interest and exchange views and Ideas related to their social, economical and political problems. Such discussions and exchange of views help in creating better understanding of each others problems and pave way for mutual-help relationship among them and thus, the countries being bound In such a relationship are benefited. They make up deficiencies of resources and build up their economies through the mutual cooperation and support.
Helps In Increasing productivity of factors of production.
Foreign trade helps In Increasing the productivity of factors of production like labour and capital by making them mobile on national as well as International level. Their mobility goes a long way to assist the under-developing countries In building up their economies on sound footing and helps the developed countries to maintain a high level of growth of their economies.
Source of diffusion of knowledge and advance learning.
Foreign trade serves as a source of diffusion of knowledge and learning from developed countries to underdeveloped countries and thus development of knowledge and advance learning, takes place which is shared by entire humanity.
Helps in maintaining global peace.
Foreign trade, by creating mutual interest among trade-related countries, minimises the possibility of political and military clashes. It. therefore, may become a source of avoiding dangers of war and helps in maintaining global peace.
Source of generating revenues.
Foreign trade helps governments in generating enough yield of huge amount of revenue in the form of tariffs, customs duties, import and export license fees and surcharges etc. Government of Pakistan generates more than 50% of her total revenue from foreign trade sector.
Induces foreign investment
Foreign trade, with the help of appropriate commercial and fiscal policies, helps in attracting foreign investment. Thus, the acquisition of required capital goods like assembled plants, manufacturing plants and the latest technology become easy to attain and the developing country like Pakistan, can get a launching pad to take off the economy.
Helps in laying the basis of economic development process.
The economic history of recent past shows that in so may backward and underdeveloping countries the process of economic development took its start apparently on the basis of foreign aid and loans. But the payments of such loans have to be made through foreign exchange earning; earned through exports.
Helps in extending markets.
Foreign trade helps in exploring new trade avenues, new channels and new markets. Extended markets help in reshaping economies on large scale which, in turn, support directly and indirectly to increase efficiency, productivity and production