FORM THREE COMMERCE – INTERNATIONAL TRADE

International trade or foreign trade is the buying and selling of goods and services outside the countries which means importing and exporting of goods and services.

HOW INTERNATIONAL TRADE ARISES

The following are the reasons of international trade which are:

• To get what a country does not have/produce because there is no any country that can produce everything to satisfy people‘s needs.
  
• To sale or dispose the surplus of goods and services produced usually a country produce more than what they need for their domestic uses / consumption therefore surplus must be sold.
  
• Geography differences are an important reason for international trade. E.g. If a country is situated in a tropic may fail to produce wheat because the crops grow well in colder countries so they will get wheat from other countries.
  
• Resource availability. A country can possess resource which another country does not have e.g. Tanzania is the only one country which produce Tanzanite therefore another countries must purchase Tanzanite from Tanzania.
  
• Human skills and productivity. Developed countries produce commodities which cannot be produced by poor countries e.g. tractors, buses, etc. Therefore poor countries must do trade those developed countries to get those commodities and that is international trade. Apart from that poor country can import those people who produce these goods so that they can assist them to produce such goods.
  
• Uneven nglish-swahili/distribution” target=”_blank”>distribution of capital equipment around the world e.g. machines, tools etc 
  

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BI-LATERAL AND MULT-LATERAL

1. BI-LATERAL trade: Is the buying and selling of goods and services between two countries.

2. MULTI-LATERAL trade: Is the buying and selling of goods and services which involves many countries. 

MULTI-Lateral trade

Is the best trade where by the world is converted in to one market where countries act as both buyers and sellers.

ADVANTAGES OF INTERNATIONAL TRADE

1. Enable a country to get what she cannot produce herself. Eg.Tanzania imports vehicles, oil, machinery etc.
   
2. Enable a country to dispose  the surplus goods which otherwise will be destroyed
   
3. Afford the citizens of a country to get greater variety of goods example in Tanzania you can buy clothes manufactured in Britain, Romania, Russia, America etc.
   
4. Enable countries to specialize in a certain production in which they have the greatest advantages over others E.g. Tanzania can socialize in the production of the Tanzanite is easily bought in the world market.
   
5. Promotes competition among producers in the world.
   
6. Competition will make producers or manufactures to produce goods which will have high value in the world market.
   
7. Promote international understanding because international trade involves movements of people of one country to another country.
   

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DISADVANTAGES OF INTERNATIONAL TRADE

1. Too much specialization on export and production of one commodity leads to hardship when there are fluctuations in price and unexpected fall in demand of that commodity
   
2. Some of the goods imported may have adverse effects on the citizen of a country example expired goods, harmful drugs etc.
   
3. If a country depends on a particular country for an important commodity it may sometimes have to tolerate some undesirable gestures from such a country.
   

   IMPORTED TRADE: This means buying of goods and services from abroad.
   

   EXPORT TRADE: Is the selling of goods and services to other countries.
   

   VISIBLE TRADE: Is the import and export of goods only or is the buying and selling of goods only from one country or to other countries
   

   INVISIBLE TRADE: Consists of the import and export of services e.g. Outside country (Tanzania) may have bank branches in other country (Kenya) the profits made by Kenya banks in Tanzania are invisible export of Kenya and invisible import in Tanzania.
   

   BALANCE OF TRADE: The balance of trade is the difference between the visible import and visible exports of a country.
   

   –Favourable balance of trade: It means that if a country exports exceed import therefore the difference would be called favorable balance of trade.
   

   –Unfavourable balance of trade: If imports exceed the exports therefore the difference would be called an unfavourable balance of trade
   

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NB: (a) Visible trade=Goods trade e.g. Machines, motor current

      (b)Invisible trade=Services trade e.g. Banking, exports etc.

BALANCE OF PAYMENTS: Is the difference between the receipts of both visible and invisible exports and the payments of both visible and invisible imports.

Favourable balance of payments: This is when the receipts (exports) exceed the payments (imports)

Unfavourable balance of payments: This occurs when the payments exceed the receipts.

DIFFERENCE BETWEEN BALANCE OF TRADE AND BALANCE OF PAYMENTS.

Balance of trade is the difference between the visible imports and visible exports while balance of payments is the difference between the receipts of both visible and invisible exports and that of the payments of both visible and invisible imports.

IMPORTANCE OF IMPORT TRADE

Import trade: Is the buying of goods and services from other country, import trade have the following importance

1. To get what a country does not produce. E.g. Tanzania is not industrialized country therefore cannot produce machinery, motorcars, etc. Those goods should be imported from abroad
   
2. To being about the development of an economy e.g. a country can import machinery for building industries (capital goods) experts to teach etc all of these can be imported to generate various developments of consumer products.
   
3. Importation of goods helps in satisfactions of certain cultural and religious feeling e.g. Imported of musical instruments can satisfy peoples feeling when used in musical bells, drums for traditional dances and some musical instruments can attract people to attend masses.
   
4. Import trade brings about better standard of living among the community of importing country, the importing country will import goods which help to improve standard of living. 
   

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TYPES OF IMPORT TRADE   

Import trade may be classified into the following categories:

Direct imports

This means that the importation of goods for the use of importer him/herself. E.g. if a person want to plant maize he/she may import tractor and a planter for that specific purpose. This made without making use of a middleman or a wholesalers

Indirect imports

This is importation through wholesaler import merchants. The merchant in this case do not use the goods himself but sell them to shopkeeper at the profit.

IMPORT PROCEDURES

In order to import goods in Tanzania the importer must apply for an import license from bank of Tanzania.

Before the license is granted the imported must submit with his application and three copies of perform invoice.

Perform invoice is a document which shows the quantity value and place of the goods to be bought it is the same like an ordinary invoice but the difference is that perform invoice does not DEBIT perform invoice is send to anybody who expects to buy the goods.

The bank of Tanzania and ministry of industry must satisfy that the goods actually originate in the country where they are ordered.