The foreign trade stimulates the economy of the countries. In addition, it promotes employment, increases the supply of goods and production.
The problem that foreign trade solves is where to place surplus production and where to stock up on inputs not produced in the country. Finished goods are also included. Trade opening, with the signing of bilateral and multilateral agreements, provides the opportunity for companies to access a greater supply and demand.
In other words, countries in search of a greater diversity of goods and services go to other countries to satisfy their needs. The sum of these individual actions of the countries, give rise to international trade. See the Difference between international trade and foreign trade.
Therefore, foreign trade allows countries to reduce the limitations in the availability of materials. As well as raw materials, inputs, and finished goods. The Advance Authorisation Scheme in India enables exporters to import the raw material from other countries as duty-free import and thus removes a great barrier and opens an economic benefit.
Other benefits of foreign trade
Other elements that give relevance to foreign trade are the following:
- Strengthening of bilateral relations: The flow of money between countries generally strengthens their diplomatic ties. These economies tend to generate stronger trade agreements. It also generates greater cultural exchange and ties of friendship.
- Access to raw materials: In such a volatile market, it is important to strengthen ties with major producers. In this way, you can avoid being affected by political actions by having a supply from a commercial partner.
- Taking advantage of comparative advantage: The advantage in production costs will make product prices more attractive to consumers. Exploiting this feature is vital for industries. With bilateral agreements between trading partners, the probability of imposing protectionist measures decreases.
- Greater variety of products: Consumers will be able to access a greater diversity of products with access to other markets. This could mean an improvement in both price and quality for buyers.
- Growth and development: Likewise, trade invents economic growth. Therefore, there are better opportunities to improve the quality of life of citizens. Employment and production are created. Increasing the possibilities of achieving economic development.
The 2 Schemes available to Indian Exporters for great leverage to export business
- EPCG Scheme: Under this Export Promotion Capital Goods Scheme, the businessmen can import any machinery or capital goods at zero import duty provided the machinery is being used for the production of export material. Earlier the costly machinery leads to higher custom duty which is a restriction for the businessmen and they tend to restrict the quality and there was the compromise.
- RoDTEP Scheme: The Remission of Duties or taxes on export products was imposed as a result of the complaint against India by the USA at WTO (World Trade Organization). This scheme has now replaced the MEIS scheme as the later was not in compliance with the norms of the World Trade Organization. It will reimburse the taxes and other levies including duty