Question

Explain the types of foreign trade

Answer 1

Foreign trade refers to trade between different countries of the world. It is also called as ‘International Trade’ or ‘External Trade’. According to Wasserman and Hultman, “International Trade consists of transaction between residents of different countries”. Foreign trade is divided into the following three types:

1. Import trade: Its refers to purchase of goods and services by one country from another. In other words, it is inflow of goods and services to home country from 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 outflow of goods and services from home country to foreign country. E.g.: India exports tea, rice, jute to China, Hong Kong, Singapore etc. 
3. Entrepot trade: its refers to purchase of goods and services from one country for reselling to another country after some processing. E.g.: Japan imports raw material required to make electronic goods like, radio, washing machine, television etc. from England, Germany, France etc. and then sells them to various countries after processing them.