Discuss the Characteristics of foreign trade or International Trade in Bangladesh

Characteristics of foreign trade or International Trade  in Bangladesh

Characteristics of foreign trade or International Trade  in Bangladesh

Every foreign market has its own characteristics. It has own requirements, customs, traditions, weights and measures, marketing methods, etc. An extensive study of foreign markets is required to be successful in foreign trade, which may not be possessed by an ordinary trader.

International trade is characterized by the following features:

  1. Territorial specialization:

International trade takes place basically due to geographical specialization. Every country specializes in the production of goods and services in which it has a specific advantage.

  1. International competition:

Producers from many countries complete with another to sell their products. Therefore, there is intense competition in international trade. Here the quality, design, packing, price, advertisement, etc., all play a significant role in deciding the winner in the market.

  1. Separation of sellers from buyers:

In international trade sellers and buyers belong to different countries. They may have no chance of ever meeting one another. Therefore, they have to depend upon middlemen for transactions.

  1. Long chain of middlemen:

The procedure of international trade is very long and complex. It is very difficult for buyers and sellers to perform all the formalities themselves. They require the services of expert middlemen such as, indent houses, forwarding agents, clearing agents, foreign exchange banks, etc.

  1. Mutually acceptable currency:

The currencies of importing and exporting countries generally are different. Therefore, it is necessary to find out a mutually acceptable currency. Generally, dollar and pound sterling are selected. These currencies are known as hard currencies because they are acceptable all over the world.

  1. International rules and regulations:

Businessmen engaged in international trade require knowledge of international laws and trade restrictions.

  1. Government control:

The government of every country exercises control over imports and exports for national interest. In every country, government controls the foreign trade. It gives permission for imports and exports may influence the decision about the countries with which trade is to take place.

  1. Several documents:

A large number of documents are required in international trade.

  1. Foreign Currency: Foreign trade involves payments in foreign currency. Different foreign currencies are involved while trading with other countries.
  2. Restrictions: Imports and exports involve a number of restrictions but by different countries. Normally, imports face many import duties and restrictions imposed by importing country. Similarly, various rules and regulations are to be followed while sending goods outside the country.
  3. Risk Element: The risk involved in foreign trade is much higher since the goods are taken to long distances and even cross the oceans.
  4. Law of Comparative Cost: A country will specialize in the production of those goods in which it has cost advantage. Such goods are exported to other countries. On the other hand, it will import those goods which have cost disadvantage or it has no specific advantage.
  5. Ready-Made Garments (RMG) Industry Dominance: Bangladesh is well-known for its thriving ready-made garments industry, which accounts for a significant portion of its exports. The country is a major exporter of clothing to various international markets.
  6. Export-Oriented Economy: Bangladesh has an export-oriented economy, with a strong emphasis on exporting goods to other countries. Apart from RMG, other key export sectors include jute and jute products, leather goods, pharmaceuticals, and agricultural products.
  7. Import Dependency: While Bangladesh is an exporter, it also heavily depends on imports, particularly for raw materials, machinery, and petroleum products.
  8. Trade Deficit: The country usually experiences a trade deficit, meaning the value of its imports exceeds the value of its exports. This can put pressure on the country’s foreign exchange reserves.
  9. Trading Partners: The major trading partners of Bangladesh include the United States, European Union countries, China, India, and several other Asian countries. These countries are the primary destinations for Bangladeshi exports and the major sources of its imports.
  10. Diversification Efforts: Over the years, Bangladesh has been making efforts to diversify its export basket to reduce its reliance on the RMG sector. The government has been promoting non-traditional exports to expand the range of products it sells to foreign markets.
  11. Trade Agreements: Bangladesh is a member of various regional and international trade agreements. It is part of the World Trade Organization (WTO) and benefits from trade preferences under various trade arrangements, such as the Generalized System of Preferences (GSP) and the Everything But Arms (EBA) initiative for the Least Developed Countries (LDCs).
  12. Challenges: Bangladesh faces challenges in terms of infrastructure development, bureaucratic hurdles, trade barriers in foreign markets, and compliance with international standards. Addressing these challenges is crucial for enhancing its global trade competitiveness.

SEO Keyword: Discuss the Characteristics of foreign trade or International Trade  in Bangladesh

  • Garment Industry Dominance: The garment industry is the backbone of Bangladesh’s economy and the primary driver of its exports. The country is one of the world’s largest exporters of ready-made garments, and it heavily relies on this sector for foreign exchange earnings and employment.
  • Export-Oriented Economy: Bangladesh’s trade policy is geared towards promoting exports. The government offers various incentives and support to encourage export-oriented industries, including tax benefits, subsidized loans, and export processing zones.
  • RMG Exports: As mentioned earlier, the ready-made garment (RMG) sector is the most significant contributor to Bangladesh’s exports. Major markets for Bangladeshi garments include the United States, the European Union, and Canada.
  • Textiles and Jute Exports: Aside from garments, Bangladesh also exports textiles and jute products, although their significance has reduced compared to the RMG sector.
  • Import Dependency: Bangladesh relies heavily on imports for various commodities, including raw materials, capital goods, machinery, and petroleum products. As a result, the country faces challenges related to trade imbalances.
  • Trade Deficit: Bangladesh often experiences a trade deficit, where its imports surpass exports. This deficit is partially offset by remittances from overseas Bangladeshi workers.
  • Preference for Non-Tariff Barriers: The Bangladeshi government has historically preferred non-tariff barriers over high tariffs to protect domestic industries and regulate imports.
  • Trade Agreements: Bangladesh is a member of various regional and bilateral trade agreements, including the South Asian Free Trade Area (SAFTA), which aims to promote trade within the South Asian region.
  • Remittances: Remittances from Bangladeshis working abroad, particularly in the Middle East and Southeast Asia, play a significant role in the country’s foreign exchange earnings.
  • Trade Balance with India: India is one of Bangladesh’s major trading partners, with a trade imbalance that generally favors India.
  • Challenges: Bangladesh faces challenges such as infrastructural limitations, bureaucratic complexities, compliance issues, and concerns related to labor rights and environmental standards in the garment industry.