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   /   m   o   c .   e   e by Foreig n QUES QUESTI TION ON No.25 No.25.. What What do you yo u mean   r has to f ace in Trade? Trade? Discuss the problems pro blems a trader foreign trade?    f  ANSWER:  A NSWER:   e   n INTRODUCTION: Trade is one of the important    i part of commerce .It implies to exchange exchange of goods goods & receives money for other other goods.    l money The trade which is being conducted now a day is totally   n changes from the trade few decades ago. The goods are   o produced & sold in the local market without any problem.    lhas increases & firms are But now a day competition exposing new market in   l order to resist or to expand their trade activities. The act   a on behalf of firm to explore new market outside boundaries of the country is known as . foreign trade/external trade.   w DEFINITIONS: “FO “FOREIGN IGN TR TRADE” ADE”   w imp i mplili es t he buyi ng & sellin ell ing g of goods good s &   wons of di ff erent services ervices b/ w t he nations nati erent count ries. ries. It consis onsistt of expand expand of goods im pactt of goods from fr om abroad.”  abr oad.”     / and impac OR     / “Foreign “Foreign t rade rad e refers ref ers t o exc exchange of goods good s & services ervices b/ w t he   : cit izen izen of t w o or more count count ries it is for eign trade. tr ade.”  ”    p  OR     t    t    h FOREIGN TRADE:

   /   m “When there is any dealing dealing in i n good & services ervices b/ w t w o or   o more mor e count ries ri es it is for eign trade.”  t rade.”    c CAUSES OF FORIEGN TRADE: . The main causes due to which countries indulge is foreign   e trade are:   e lacks in Every very country is not self sufficient sufficient it lacks certain certain th ings due to which it has  r to make make impacts. impacts. It creates creates better better re r elations hip   f among mon g th e different dif ferent countries.   e With the help help of in ternational ternational trade, trade, a countr y can   n have advantage dvantage in the prod uction of some goods over    i other goods , which can be export e xport ed to other count ries    l to earn earn high pr ofits. It helps helps in i n getting gettin g the th e advantage adva ntage of decision o f   n labor.   o It broader broader the market market for p roducer rod ucer cult ivates of    l other oth er countries count ries can be acquainted. cqu ainted.    l   a . NO doubt foreign trade increases the pace of   w economic development of a country. It helps a country   w including market expansion achieving different goods   w exchange employment, increase accumulation of foreign in living standard   / & many other means of objective, but on the other hand there are problems which are faced in    / foreign trade. The main difficulties which are faced by the   : parties involved in foreign trade are as under:   p  1. DISTANCE:    t    t    h   

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DIFFICULITIES/PROBLEMS DIFFICULITIES/PROB LEMS Faced in FOREIGN TRADE:

   /   m Distance is the foreign trade varies from country to country. Usually, it carries long distance.   o Even with the   c & transport. development of fast means of communication It is normally difficult to establish close relationship b/w . importer & exporter.   e   e 2. PAYMENT:   r in the currency of  All payments in foreign trade are made exporter country. Attainment of exchange rate may create    f problem for fluctuating and calculation of prices. Existence   e of the efficient banking system is essential to avoid these   n kinds of problems.    i 3. PREPARATION OF DOCUMENTS:    l In foreign trade the importer   n as well as the exporter has to prepare large number of documents which are not   o required in home trade. For example letter of credit, bill of    llicense etc. exchange, importer exporter    l   a . 4. CREDIT CREDIT RISK: RISK :   w The exporters often sell their products on credit. They   w arising from importers default i.e. have to incur credit risk bankrupt.   w    / 5. GOVT POLICY:    / Sometimes Sometimes government government of any country country implies implies certain   :import and export of goods and restrictions on the   p  Govt license and permission is services. Moreover necessary for    tforeign trade.    t    h

   /   m   o 6. STUDY OF FOREIGN TRADE: In foreign trade both buyer and seller of   c goods have to secure full information about the customer traditions, . marketing methods etc of the other market of each other.   e If the trader is not well aware of foreign market then he is   e beard to face difficulties & suffer loss.   r 7. DIVERSITY DIVERSITY OF LANGUAGE: LA NGUAGE:   f Different Different languages languages are spoken spoken &  e written in different different countries. The trader wishing to establish trade relations   n with foreigners must have to adequate skill of foreign    i language is order to conduct trade.    l 8. PRICE DESCRIMINATION:   n Some countries countries are are indulged indulged in price discriminat discrimination ion &   o dumping of goods. This creates tension b/w the nations    l functioning of international which is harmful for the smooth    l trade.   a 9. POLITICAL CONDITION CONDITION: : . The government of the countries may restrict traders or   w foreign trade due business business man to conduct conduct foreign due to their   w embittered reduction.   w 10. 10. DEAL DEALIN ING G THRO THROUG UGH H AGENTS AGENTS::    / In foreign trade most of the functions are performed    / through agents for e.g. import & export agent, formatting agent, clearing   : agent etc. Although they facilitate the   p with agent s is a difficult task. trader but dealing Sometimes    t agent may cause delayed transactions.    t    h

   /   m   o 11. 11. LONG PER PERIO IOD D INVE INVEST STME MENT NT::   c for longer Foreign trade requires investments of funds period of time. The dispatch of goods through shipment . and their receipts by buyer take time so the capital of   e exporter may blocked for considerable period of time.   e   r 12.  AVA  A VAIL ILA A B ILITY IL ITY OF FUNDS: In foreign trade it is difficult to obtain information among    f barrier standings, financial position & credit worthiness of   e trader due to this banker may feel hesitation to grant loans   n which may act as hurdle to trader indulged in foreign    i trade.    l 13. 13. RISK ISK IN TRANS TRANSIT IT::   n In foreign trade goods are usually shipped which may sink,   o spoiled or stolen during voyage. Through insurance we can cover the risk but this   l cause increase in cost of goods.    l 14. 14. CUST CUSTOM OM DUTI DUTIES ES::   a Now days every country .lies custom duties on importer and exporter in order to protect home. Industry or for   w public revenue. High traffic restricts the entry & exit of   w goods.   w 15. 15. RISK RISK OF FREQ FREQUE UENT NT PRIC PRICE: E:    / Foreign trade is subject to frequent price changes either    / due to international competition or due to fluctuation in exchange rate.   : The par paints in foreign trade have to   p to exchange price. bear losses due CONCLUSION:    t    t    h

   /   m ansport No doubt due to t he fast fast means of comm comm unicat unicat ion , tr ansport & w idesprea idespread d educ educat ion & int ernet rnet facilit facilit at  o es t he problems problems   ced but st ill f oreign involved in foreign t rade are gradually gradual ly deuced deuc . t rade. t rade is quit e compl complicated icated as compare ompar e to home   e   e   r    f   e   n    i    l   n   o    l    l   a .   w   w   w    /    /   :   p     t    t    h