A given country will be well suited to the production of some goods (or the provision of certain services) and totally unsuited to the production of others. And yet, while trade might be the gateway to development, the statistics in Africa aren’t too impressive, especially when it comes to one of the biggest opportunities for growth: trade among African countries. Difficult problems frequently arise out of trade between developed and developing countries. Introduction In 1776 Adam Smith stated, "If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage." There are the key reason why countries trade with each other. On the other hand, the supply of cotton textile by India to the U.S.A. and the European countries, iron ore to Japan and rice to the Middle East countries and purchase of wheat from the U.S.A., oil from Iran and electronic goods from Japan, are such transactions that take place among the different countries and these transactions constitute the international trade of the country. Imports. Trade between developed and developing countries. Trade Deficit. When goods (services) are brought in, it is called import and when goods are carried out its called export. Why does a country need to trade with other countries? Before we go down that road, it is important to understand the fundamental reason why countries trade. Why do countries trade with each other? To raise the standard of living. I will show you the REASONS TO ENGAGE INTERNATIONAL BUSINESS. Goods and services going out of a country. When a country imports more then it exports. REASONS TO ENGAGED INTERNATIONALBUSINESS All organizations, irrespective of their size, are keen toenter in to international business. When the first civilizations did begin trading with each other about five thousand years ago, however, many of them got rich…and fast. Trade among nations is taken as a sign of good intention and a means of preserving non-hostile diplomatic relations. Since no country can produce or manufacture all the things that it needs, there is always the need for countries to trade with other countries that have what they need. Absolute Advantage. Exports. International trade is the exchange of goods and services between two (or more) countries. The five basic reasons why trade may take place are summarized below. The first theory section of this course develops models that provide different explanations or reasons why trade takes place between countries. 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