Definition of Foreign Trade

Foreign trade is called that economic activity involving two or more nations and consisting basically of the exchange of goods and services, importing and exporting, in order to satisfy the internal and external needs of each country, and that cannot be satisfied in the country itself because there is no national production of that good or services that is purchased at Exterior.

Commercial activity between countries in which goods or services that they do not produce locally are sold or bought

This type of trade is very common and important in the world and by case it is regulated by various treaties, conventions, and agreements in force in the countries.

The Commerce is a economic practice that consists of buying, selling, or exchanging products, materials, services, among others, to obtain economic benefits in return.

In other words, put in simpler words, trade will involve exchanging one thing for another, which is usually money.

Meanwhile, the aforementioned economic activity can be carried out within a country, and involve individuals, companies within the same territory or geographic space, or on the contrary, carried out outside the limits of a

nation, a case that is formally known as foreign trade.

Its opposite, that is, the trade that takes place within the same country will be called internal or internal trade.

Each nation stands out for the production of certain types of goods and services, which in many cases is precisely what makes them recognizable in the world economic world, for example, Argentina in the production of lemons, but now, in some areas it lacks of own production and that is where you must go out to buy abroad in order to have those goods and satisfy the needs and demands.

Not even the richest world powers are totally self-sufficient, that is, they are capable of producing, and for example, self-supplying all their demands.

So, it is a common practice for a country to sell to another what it does not produce, for example lemons in In the case of Argentina, to those countries that do not have national production of this citrus so relevant in the gastronomy and in other industries.

Source of foreign exchange income

The main characteristic of foreign trade is that it involves the entry into the country of foreign currency, foreign exchange, which means to the state in question the generation of wealth, because the country that exports its goods, services or products, and sends them to another country, which carries out the action from importIn exchange, you will receive a sum of money corresponding to the currency of the importing country.

If Argentina sells meat to the United States, will be exercising the role of exporting country and will therefore receive a payment in US currency, dollars.

This state of affairs allows a country to concentrate on the production of products or services that it has available. raw material and this then facilitates a production at low costs and with the obtaining of greater profits.

Possible in non-protectionist open economies

Now, it turns out to be a condition without equanom for this type of trade to take place, that countries present a economy open, that is, that the country in question allows the entry of goods and services that come from other countries.

For example, it is important to mention that there are some countries that do not allow this entry in order to protect their industry, although of course, with this protectionist decision they are also reduced the possibilities of marketing other products that are not produced in the country, because other countries will not want to buy from those who do not allow products to be sold in their territory outsiders.

So, the basis of foreign trade is the effective presence of commercial freedom and the elimination of border prohibitions and limitations.

It should be noted that the industrialization, the explosion of commerce and the increasingly present globalization They have agreed so that foreign trade reaches a unique importance and relevance for the countries due to the fabulous income of money that it proposes.

We must say that foreign trade demands the realization of cooperation agreements between the countries, which sign in diplomatic meetings in which the bases of the exchange are laid mutual.

Topics in Foreign Trade