(a) What is foreign trade?
(b) Explain four ways by which foreign trade is different from home trade.
(c) State five reasons why countries restrict foreign trade.
Explanation
(a) Foreign trade is the buying and selling of goods and services beyond the geographical boundaries of a country/between one country and the other.
(b) Difference between foreign and home trade Foreign Home
| Foreign | Home |
| goods are moved beyond geographical boundaries | Goods are moved within the same country |
| Different currencies are used in foreign trade | one currency is used |
| There is language barrier in foreign trade | There is no language barrier in home trade |
| More complex documentation is required in foreign trade | Less documentation is required in home trade |
| Different social standards, rules and regulations are in use | The same social standard, rules and regulations are in use |
| Transport cost is higher in foreign trade | Transfer cost is lower in home trade |
| Foreign trade is subject to restrictions | Goods move freely within a country |
| Different weights and measures are in use | Same weights and measures are in use. |
(c) Reasons for restriction of foreign trade
(i) To prevent the dumping of goods on the country.
(ii) To generate revenue for the country’s economy.
(iii) To prevent and encourage local industries
(iv) as a retaliatory measure on foreign countries where their own goods are barred (countries that do not buy their own goods)
(v) To improve balance of payment deficit.
(vi) To create employment opportunities for their citizens.
(vii) To preserve the country’s foreign reserve.
(viii) To prevent the entry of harmful goods.