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:
- 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.
- 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.
- 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.
- 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.
- 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.
- International rules and regulations:
Businessmen engaged in international trade require knowledge of international laws and trade restrictions.
- 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.
- Several documents:
A large number of documents are required in international trade.
- Foreign Currency: Foreign trade involves payments in foreign currency. Different foreign currencies are involved while trading with other countries.
- 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.
- Risk Element: The risk involved in foreign trade is much higher since the goods are taken to long distances and even cross the oceans.
- 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.
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