Role/importance/contribution of foreign trade to economic development

            

                                    Foreign trade plays a vital role in the economic development of a country. Its important can be judged from the following points.

    1.     Specialization in production:

Foreign trade leads to specialization in the production of those goods which a country can produce at lower cost. This situation improves the overall welfare of the people.

    2.     Quality goods at lower rates:

If a country cannot produce a specific commodity then it can import that commodity at lower rates from international market in the presence of foreign trade.

    3.     Flow of capital goods and technical know-how:

In the presence of foreign trade flow of capital goods and technical know-how take place which increase the rate of economic growth and development of the country.

    4.     Removal of shortage of goods:

Foreign trade is helpful for the removal of shortage of goods. If there is shortage of any commodity then that commodity can be imported from the international market which will eliminate shortage of good.

    5.     Industrial and agricultural development:

Foreign trade brings improvement in industrial and agricultural sectors of the economy. The necessary inputs of industrial and agricultural sector can be imported which will develop both the sectors of the economy.

      

    6.     Discourage the formation of monopolies:

Foreign trade discourages the formation of local monopolies. The local producers cannot exploit the consumers because of fear of cheap imports. In the absence of imports, some local firms may create monopoly and charge very high prices.

    7.     Quality important of local products:

The foreign competition helps to improve the quality of local products. If Pakistani government allows cycles to be improved, the quality of Pakistani cycles will definitely improve.

    8.     Optimum utilization of resources:

International trade helps in the optimum utilization of resources. A country specializes in the production of those goods for which its resources are more suitable and as a result the resources are properly utilized.

    9.     Price stability:

Foreign trade helps in the price stability of a country. If the price level is very high of a commodity then that commodity can be imported which will keep price in stable position.

    10.   World peace:

Foreign trade promotes price in the entire world because in the presence of international trade people of different countries come close together and they become interdependent.

    11.   Increase in national income:

In the presence of international trade the resources are properly utilized which increase exports of the country and as a result per capital income and national income increase.