Q.32. Why do International trade take place?
OR
Q.32. What are the bases for international
trade?
Some of the reasons that why do trade
between different countries occur are discussed under the following heads.
NATURAL
ENDOWMENTS
Differences in advantages of trade to
different countries may arise because of natural reasons like geographical and
climatic conditions. This lead to territorial division of labour and
localization of industry. This different countries specialize in the production
of different things.
HUMAN
CAPABILITIES
People in some countries are
physically more sturdy where as in others they are intellectually superior.
Some have greater skill and dexterity thus the countries. Which do not possess
these qualities try to share with them.
STOCK OF
CAPITAL
Some countries have large stock of
capital goods like U.K, U.S.A, etc. These gives an opportunity to the
underdeveloped countries or those which lack these capital goods to exchange or
trade them through the channel of distribution internationally.
SPECIALIZATION
IN PRODUCTION
A country may have a comparative cost
advantage in production in more than one commodity over other countries but
produces only one commodity for the sake of specialization. It helps in
improving the quality of production to a great extent.
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