If you read on the news that Japan and Ukraine will take part in any international trade system of some particular goods for some period of years, what would come first in your mind? DO you think there would be any challenges these two countries would face when taking part in this trade. Would there be benefits? Countries engage in foreign trade for the following reasons:
1. Uneven distribution of natural resources: Natural resources are unevenly distributed, While some countries are naturally blessed, others have little or no natural resources. This necessitates international trade.
2. Differences in climatic condition (especially when Agricultural goods are concerned): The climatic condition of the earth varies from one region to another. This variation gives rise to growth of different crops, hence the need for exchange.
3. Differences in technology: The level of technology differs from one nation of the world to another. Some countries with advanced technology can produce some industrial products at reduced cost and sell to the less developed countries.
4. Differences in skills: The inhabitants of a region may develop special skills in the production of a commodity such that it acquires special reputation for its skill. This can necessitate foreign trade.
5. Expansion of market for products: Foreign trade came into existence because of the need to widen the market for goods produced by a country.
6. Differences int he efficient use of natural resources: Foreign trade may arise because of differences in efficiency in the use of natural resources.
7. Differences between patterns of production and consumption: The differences between patterns of production and consumption in different countries necessitate international trade.
8. Differences in taste; Differences in taste of various countries call for international trade.
9. Desire to improve the standard of living: Countries engage in international trade in order to improve the standard of living of the people.
Barriers or problems
1. Language problem: Different languages are spoken by different countries of the world. Communication between businessmen from various countries with different linguistic background may be difficult.
2. Problem of distance: it may take days or weeks before one moves from one country to another because of the long distances involved. This may delay quick exchange of goods and services.
3. Numerous documents: The documents used in international trade are two many. This makes the processing of foreign trade too long and sometimes cumbersome e.g, bills of exchange, ship manifest, certificate of origin etc.
4. Differences in currency: Every country has its own currency which is different from the currency of other countries. In foreign trade, the currency must be converted before meaningful transactions can take place.
5. Tariff: A country can impose import duties (tariff) on imported goods and this will make the goods be more expensive.
International trade often leads to trade imbalance among nations with the effect that viable countries may not transact business with the weaker ones. Foreign trade can be hindered by the political ideologies of different countries. A country can deliberately decide not to trade with another country because of its political differences e.g, the USA and Libya in 1988. Further barriers could be: there is no international uniformity in the system of weighing and measuring of goods hence the system is not standardized, therefore, it has to be converted and this hinders trade.
Artificial barriers can be created for instance by the imposition of outright bad on products, quota systems or imposition of licenses on goods. Businessmen from different countries especially African countries find it difficult to contact their partners in other countries because of poor communication and transport facilities. This hinders foreign trade greatly. And finally, religious beliefs and culture differ from one country to another and these can constitute a hindrance to international trade.