a) Mention Five benefits enjoyed by counties engaging in foreign trade.
b) Explain five measures taken by countries to correct an unfavourable balance of payment
(a) Benefits enjoyed by countries engaged in Foreign Trade
- Foreign trade creates additional markets for goods and services.
- It makes it possible for countries to obtain goods they could not produce either because of a lack of natural resources or capital.
- It confers comparative cost advantage which encourages mass production of goods and services/specialisation.
- Foreign trade creates Job opportunities for member countries
- It generates more revenue for the nations involved.
- It encourages inter-dependence among nations
- Foreign trade facilitates the transfer of technology.
- It fosters close economic ties and diplomatic relations among trading nations.
- It increases variety/choice of goods and services thereby increasing standards of living.
(b) Measures to correct unfavourable Balance of Payment
- An outright ban on imports to discourage the importation of goods and services.
- Drawing from foreign exchange reserves to offset the adverse balance of payment.
- Export promotion- increase export of both visible and invisible goods (encouraging home/local production).
- Devaluation of currency to attract foreign investors.
- Borrowing from international financial institutions e.g. IMF(International Monetary fund).
- Sale of a country’s asset or gold reserves
- Exchange control regulation- the amount of foreign exchange that could be held by citizens could be controlled.
- Obtaining grants and debt cancellation from friendly countries can be used to offset the unfavourable balance of payments.
- Reduction in the importation of goods through the imposition of tariffs, quotas etc.
- Promotion of import substitution industries.