SS1 Commerce Lesson Note on Foreign Trade

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TOPIC:  FOREIGN TRADE

CONTENT:

1. Meaning of foreign trade
2. Types of foreign trade: i. Bi-lateral foreign trade ii. Multilateral foreign trade
3. Advantages and disadvantages of foreign trade
4. Divisions and barriers to foreign trade

MEANING OF FOREIGN TRADE:

Foreign trade which is also called international trade, external trade refers to buying and selling across the border of a country i.e. trade between buyers and sellers at least two different countries. Foreign trade can be either export or import. Export means, selling goods or services abroad i.e.  The seller is resident in the country while the buyer is resident in another country. Import, on the other hand, refers to buying of goods or services from abroad i.e. the buyer is resident in the country while the seller is resident in another country.

EVALUATION:

What is international trade?

SUB-TOPIC 2: DIFFERENCE BETWEEN HOME TRADE AND FOREIGN TRADE

DOMESTIC TRADE	FOREIGN TRADE
1.     It is the trade within the country	Trade with other country
2.     It is not subject to restriction	There are restriction
3.     The same currency is used to transact trade	Different currency is used
4.     It involve short distance	It involve long distance
5.     Same weight and measures are used	Different measures and weight are used
6.     The same language is used and there is no language barrier	Different languages are used and there language barrier
7.     There is free mobility of labour	There is restriction to mobility
8.     Goods are moved within the same boundaries	Goods are moved beyond geographical boundaries

SIMILARITIES BETWEEN FOREIGN AND DOMESTIC TRADE

1. Both are facilitated by aids to trade
2. Currencies are involved in both case
3. Both involves the act of buying and selling of goods and services
4. Both are division of trade.

EVALUATION

• Give two similarities and difference between home and foreign trade

SUB-TOPIC 3: MEASURES TO PROMOTE EXPORT TRADE

1. Promotion of credits facilities to the exporters
2. Currency should be devaluated to make export cheaper than import
3. Export promotion Agency will be set up by the government I other to encourage exportation
4. Companies that are export based should be given incentive and holiday.
5. Export levied on food items should be reduced in order to encourage exportation
6. Communication and transportation facilities should be improved on to make them more efficient
7. The existing sea and air-port should be improved.

ENTRE-PORT: This is the re-exporting of goods that has been imported from other countries. Goods imported to a country are later re-exported to another country.

FUNCTIONS OF NIGERIA EXPORT PROMOTION COUNCIL.

EXPORT DEVELOPING ACTIVITIES:

Nigeria export promotion council introduces measures to increase the volume and quality of goods to be exported

1. Activities relating to export marketing: It helps to provide information Nigeria exports in the international market and how to improve its marketability.
2. Export funding : It provides export financing facilities e.g. insurance and credit guarantee schemes
3. Provision of trade information: It helps to review existing products for export and also to set out the procedure for exportation.
4. Provision of activities that facilitate trade
5. Publicity function
6. Training activities: It organizes seminars and workshops on export management for people engaging in international trade.

EVALUATION

1. List two methods taking by the government to promote export trade
2. Briefly justify the roles of Nigeria export promotion council.

SUB-TOPIC 4: FORMS/TYPES OF INTERNATIONAL TRADE

1. BILATERAL TRADE: this occurs when one country agrees to exchange goods and services with another country. It involves buying and selling between two countries e.g. trade between Nigeria and Russia is bilateral trade agreement.
2. MULTILATERAL TRADE: this involves buying and selling among many countries. It occurs when each nation buys and sells with whatever country it wishes. This result in a greater volume of trade being carried on than in a bilateral trade agreement e.g. Nigeria has multilateral trade agreement with countries like America, China Russia, Britain and Holland.

REASONS FOR INTERNATIONAL TRADE

1. Differences in the level of industrialization: the level of industrialization differs from one country to another. Some countries are highly industrialized while some are not. This will bring a disparity in the level of production.
2. Inequality in the distribution of national resources: Natural resources are not evenly distributed on the surface of the earth. Different resources are found in different part of the world. Nigeria has crude oil in abundance while Ghana has gold.
3. Difference in climatic condition: One of the reasons for international trade is the difference in climatic condition and weather. Some countries are very cold while some are temperate. Rubber and cocoa are found in the countries that are located in the rain forest while groundnut grows better in the savannah regions.
4. Different in skill and technical knowledge: The level of technology in some country is more advanced than others. Because of their skills and technical knowledge, goods of high quality are produced e.g. Japan is very good in production of automobile and electronics
5. Difference in level of technology: The level of technology of some countries is more advanced than others. Because of these reasons, goods can be produced efficiently in large quantities and better quality than others. This will necessitate international trade.
6. Difference in human resources
7. Expansion of world market.
8. Difference in the efficiency in the use of natural resources.

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