In this blog we are going to be looking at barriers or problems associated with international trade or foreign trade from problems of distance, difference in currency to problems of Communication and transportation.
Table Of Contents
- Problems associated with international trade.
- Revision Questions
There are so many problems associated with international trade, but the following can be identified:
- Problem of distance: The cost of freight, wether by road, air or sea is high, as well as the risk of loss or damage since most of merchants do not always take insurance policy.
- Difference in currency: Fluctuations in exchange rate may work against the volume of transactions as well as none available of foreign currency.
- Difference in language is a serious setback in international trade: Most countries or Nations experience translation problems which result in loss of accurate meaning to words and terms.(a) Also understanding communications among countries becomes more difficult. (b) Engagement of interpreters involve extra cost.
- Religious/cultural problems: Plays important role in slowing down the pace of international trade. (a) in particular, the choice of symbols, signs and trademarks are limited since the country may not understand them. (b) cultural taboos inhibit trade.
- Different in business laws and regulations: Business is not regulated by the law of the importing country but by international law. There is need for the knowledge of other countries, to assist countries/business men in trade transactions.
- Difference in weights and measures: The issue of weight and measures create a problem of conversion from imperial to metric system, etc.
- Political instability: The issue of frequent change of government and rampant coups as well as wars and disagreement among Nations disturb trade.
- Imposition of tariff – Quotas, exchange rate control: Flexible Customs regulations and tariff limit the extent of foreign trade.
- Documentation: Too many documents are required which involve extra cost and personnel, thereby slowing down transactions among Nations.
- Government policies: Foreign trade can be hindered by the political ideologies of different countries. A country can deliberately decide not to trade with another country because of its political differences, e.g, The USA and Libya owing to the 1988 Lockerbie aircraft bombing.
- Transportation and communication: Businessmen from different Nations especially African countries find it difficult to to contact their partner in other countries because of poor communication and transport facilities. This hinders foreign trade in greatly.
- Trade restrictions: Trade restrictions by countries have been created by trading partners when they discovered they have adverse balance of trade or payment. Such restrictions include embargoes, duties, quota and cartel.
Revision Question
- List and explain the barriers or problems associated with international trade.
- Discuss the problems of differency in currency.
- Discuss the problem of culture and religion.
- Discuss the problem of government policies association with international trade