Why does a country need to trade with other countries? When a country imports more then it exports. The first theory section of this course develops models that provide different explanations or reasons why trade takes place between countries. Why do countries trade with each other?Show, using examples, why this may be to do with principle of comparative advantage. The five basic reasons why trade may take place are summarized below. Difficult problems frequently arise out of trade between developed and developing countries. Goods and services going into a country. Trade among nations is taken as a sign of good intention and a means of preserving non-hostile diplomatic relations. In 2014 in Europe, for example, 69% of exports were to other countries on the continent. Exports. Imports. And yet, while trade might be the gateway to development, the statistics in Africa aren’t too impressive, especially when it comes to one of the biggest opportunities for growth: trade among African countries. To raise the standard of living. Trade between developed and developing countries. Goods and services going out of a country. When the first civilizations did begin trading with each other about five thousand years ago, however, many of them got rich…and fast. Trade Deficit. A given country will be well suited to the production of some goods (or the provision of certain services) and totally unsuited to the production of others. Absolute Advantage. I will show you the REASONS TO ENGAGE INTERNATIONAL BUSINESS. Most less-developed countries have agriculture-based economies, and many are tropical, causing them to rely heavily upon the proceeds from export of one or two crops, such as coffee, cacao, or sugar. Why do countries trade with each other? Introduction In 1776 Adam Smith stated, "If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage." There are the key reason why countries trade with each other. International trade has existed since time immemorial and will keep on existing simply because the world cannot do without it. Why do nations trade with each other? International trade is the exchange of goods and services between two (or more) countries. Are there any disadvantages for international trade? Each country has a different allocation of natural and human resources. On the other hand, the supply of cotton textile by India to the U.S.A. and the European countries, iron ore to Japan and rice to the Middle East countries and purchase of wheat from the U.S.A., oil from Iran and electronic goods from Japan, are such transactions that take place among the different countries and these transactions constitute the international trade of the country. 1. When goods (services) are brought in, it is called import and when goods are carried out its called export. Before we go down that road, it is important to understand the fundamental reason why countries trade. Since no country can produce or manufacture all the things that it needs, there is always the need for countries to trade with other countries that have what they need. REASONS TO ENGAGED INTERNATIONALBUSINESS All organizations, irrespective of their size, are keen toenter in to international business. 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