Question

Give the significance of ‘stage of economic development ‘and ‘extent of foreign investments’ as bases of international trade in detail.

Answer 1

Stage of economic development: At different stages of economic development of countries, the nature of items traded undergo changes. In agriculturally important countries, agro products are exchanged for manufactured goods whereas industrialised nations export machinery and finished products and import food grains and other raw materials.

The extent of foreign investment: Foreign investment can boost trade in developing countries that lack in capital required for the development of mining, oil drilling, heavy engineering, lumbering, and plantation agriculture. By developing such capital intensive industries in developing countries, the industrial nations ensure the import of foodstuffs, minerals and create markets for their finished products. This entire cycle steps up the volume of trade between nations.