International Trade - Profit or Loss?

Foreign trade is the exchange of goods or services against payment between entrepreneurs in different countries. So what are the essential benefits of foreign trade? Is foreign trade profitable? We'll find out all this in a moment!

When discussing international transactions, it is worth recalling a few key concepts: import, export, re-export, transit and processing.

The first mentioned issue concerns the purchase of goods abroad and bringing them to the buyer's country, i.e. your company - the subsequent sale takes place only on the domestic market.

The second concept is selling our products in other countries, i.e. we export them from our country and offer them to entirely new recipients.

We divide re-export into direct and indirect. Direct is purchasing goods abroad and direct sales to a partner from another country - bypassing the home country. On the other hand, indirect transactions concern purchasing products abroad, bringing them home and further export abroad.

Transit is the transportation of purchased goods from one country to another through a third territory.

So what is processing? This type of trade involves processing raw materials or semi-finished products supplied from another country at the request of a specific foreign company.

As you can see, foreign trade refers to many activities, although most often, it focuses on the import and sale of goods and services to foreign markets. It is worth considering which operation in the exchange of goods and services would be best for the development of your company if you want to develop your business and conquer the world.

Therefore, it is crucial to analyse the benefits of foreign trade. Today it is not easy to imagine that any country in the world would produce and sell products exclusively on its territory only.

Thanks to international exchange, each of the parties involved in the transaction may purchase specific goods and factors of production. Thanks to the import of various products, we have easy access to them - we do not have to worry that there will be a shortage of, for example, coffee, which is not grown in the UK. Another benefit is that some countries produce certain goods at a lower cost, which pays off for the buyer, especially if the demand for this type of goods is high. Below is a list of other benefits of international trade:

  • foreign exchange enables better, rational use of resources and production factors at the disposal of a given country;

  • international cooperation provides access to a broad and much more diversified product offer - sometimes it is difficult to imagine functioning without a product that we could not purchase without foreign trade, and there are many such products;

  • international trade contributes to saving resources;