Question

Explain the concept of foreign trade and its types.

Answer 1

Foreign Trade is traded between the different countries of the world. It is called International Trade or External Trade.

According to Wasserman and Hultman, “International Trade consists of the transaction between residents of different countries”.

Foreign trade is divided into the following three types:

1. Import Trade: Import trade refers to the purchase of goods and services by one country from another. In other words, it is the inflow of goods and services to the home country from a foreign country.
   E.g.: India imports petroleum from Iraq, Kuwait, Saudi Arabia, etc
2. Export Trade: Export trade refers to the sale of goods and services by one country to another. In other words, it is the outflow of goods and services from the home country to a foreign country.
   E.g.: India exports tea, rice, jute to China, Hong Kong, Singapore, etc
3. Entrepot Trade: Entrepot trade refers to the purchase of goods and services from one country for reselling to another country after some processing.
   E.g.: Japan imports raw materials required to make electronic goods like radio, washing machines, television, etc. from England, Germany, France, etc., and then sells them to various countries after processing them.