what is Foreign Trade? How does …

Foreign trade is the trade between different countries of the world. It consists of imports, exports . The inflow of goods in a country is called import trade whereas outflow of goods from a country is called export trade.

Integration of markets across countries:
(i)Foreign trade creates an opportunity for the producers to reach beyond the domestic markets, i.e., markets of their own countries.
(ii)Producers can sell their produce not only in markets located within the country but can also compete in markets located in other countries of the world.
(iii)Similarly, for the buyers, import of goods produced in another country is one way of expanding the choice of goods beyond what is domestically produced.
(iv)In general, with the opening of trade, goods travel from one market to another. Choice of goods in the markets rises. Prices of similar goods in the two markets tend to become equal. And, producers in the two countries now closely compete against each other even though they are separated by thousands of miles.
(v)For example, during Diwali seasons, buyers in India have the option of choosing between Indian and the Chinese decorative lights and bulbs. Many shops have replaced Indian decorative lights with Chinese lights. For Chinese light manufacturers, this provides an opportunity to expand their business.