International trade or foreign trade is based on the theory of comparative cost advantage. Since each country has certain benefits from production of a particular product or commodity, they use their resources which are exclusively available in that country. Thus if the crude oil is exclusively available in oil producing countries, they have a comparative advantage of crude oil production at a cheaper rate over other nations. Thus exporting to oil deprived nations will earn it profits. Thus no country is self-sufficient and depends on other nations for some product or service. International trade thus encourages the theory of comparative cost advantage so that whatever product is produced cheaper than other economies is exported to make profits.
The Trade Financial Transaction takes place when an exporter and importer agree to a contract. Wherein the exporter requires an importer to prepay for the goods shipped. The letter of undertaking (LoU) or letter of credit (LC) serves the purpose and works as a documentary proof of the shipment details. The letter of credit is issued by the importer’s bank to the exporter’s bank providing for the payment upon presentation of bill of lading. The banks deal with documents and not the physical goods or services.
The balance of payment is a periodic statement of money value of all transactions between residents and government of one country and residents and governments of all other countries. They are usually categorized into three accounts: the current account (export and import), the capital account (purchase of assets by foreigners and foreign assets purchased by residents), and official reserve account (holding of foreign currencies and currency held by foreign governments).
The current account is the difference between the value of goods exported and the value of goods imported. Exports are products that a country sells to other countries and imports are products that a country buys from other countries. A country will have a trade surplus if its exports exceed imports. On the other hand, a country will have a trade deficit if its imports exceed its exports. India currently has a trade deficit.
07 Jun 2019 05:12 PM
The trade war is a situation in which countries involved damage each other’s trade by imposing tariffs on imports with the broad intention of saving its own industries and creating job opportunities for its citizen.
31 May 2019 02:55 PM
Foreign Services from reliable service providers like that of Myforexeye include a range of solution that is aimed to help businesses and individual traders to better their trading every day by analyzing the market’s movements.
27 May 2019 05:45 PM
Enterprises who are into the import and export business strive to derive financial flexibility to boost their purchasing power. With efficient export and import financing strategies one can help businesses face its financial challenges.
24 May 2019 03:19 PM
1. Foreign exchange as the term says is an exchange of foreign currency. Exchange of one country’s currency against another country’s is done in the foreign exchange or forex market.
23 May 2019 12:04 PM
Foreign exchange depends on the value of the currency. And, as far as the valuation of currency is concerned, it again depends on a number of factors such as - trade, investment, tourism, and geopolitical risk. The foreign exchange market also repres
21 May 2019 05:13 PM
A letter of credit provides an irrevocable guarantee to the seller that provided the goods and/or services are delivered to the buyer according to contractual terms and with the required documents, it will be paid by the bank that issued letter of cr