Foreign Trade

“Trade is essentially an international transformation of commodities, inputs and technology which promotes welfare in two ways. It extends the market of a country‟s output beyond national frontiers and may ensure better prices through exports. Through imports, it makes available commodities, inputs and technology which are either not available or are available only at higher prices, thus taking consumers to a higher level of satisfaction.The foremost principle of foreign trade, viz.,the law of comparative costs‟, signifies that what a country exports and imports is determined not by its character in isolation but only in relation to those of its trading partners.

According to Samuelson “Foreign Trade offers a Consumption possibility frontier that can give us more of all goods than can own domestic production possibility frontier.The extension of foreign trade, according to Ricardo “will very powerfully contribute to increase the mass of commodities, and therefore, the sum of enjoyments”. This will be true for each trading nation. In modern terminology, “trade is a p positive sum game”. Under developed countries are concerned with their international trade position, because for all of them, international trade position, because for all of them, international trade-how,skills, capita, machinery and implements which are essential for their economic development.