Merits and demerits of international trade

  

Date Posted: 12/19/2012 2:07:22 PM

Posted By: sashoo  Membership Level: Silver  Total Points: 382

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Merits of International Trade.
1. It enables a country to obtain all those goods it cannot produce locally.
2. To promote good relationships among nations of the world.
3. It enables a country to purchase goods and services more cheaply than it can produce.
4. It gives a wider choice of commodities to the consumers i.e. consumers have a large variety of goods to choose from.
5. It encourages specialization among countries of the world.
6. It contributes to a better standard of living.
7. It earns the government foreign exchange that improves its balance of payment.
8. It helped a country to dispose of its surplus output.
9. It creates employment opportunity to the people of a country because people work or are employed in companies dealing with international transaction.
10. It boosts economic growth through imported capital goods used in manufacturing industries like machinery.

Demerits of International Trade.
1. Unwanted and harmful goods may be imported into a country.
2. It may create balance of payment deficit if a country imports more than it exports.
3. It threatens local infant industries through stiff competitions.
4. The supply of imports is not guaranteed, mostly during periods of emergency or political turmoil.
5. International price fluctuations mostly for agricultural commodities may earn the exporting country loss revenue.

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