Theory question 101
Foreign TradeCommerce 2
(a) What five benefits does Nigeria derive from engaging in international trade?
(b) State and explain five problems likely to be faced by a businessman who wants to sell his goods overseas.
Show the model answer
(a) Benefits (any five): gets goods it cannot produce or produces at high cost; wider market for its exports (oil, cocoa, groundnuts) so producers expand; foreign exchange earnings; specialisation according to comparative advantage raises output; higher standard of living and wider choice for consumers; transfer of technology and skills; employment in export industries and related services; government revenue from import and export duties; better international relations and co-operation.
(b) Problems (any five, explained): language differences; different currencies and exchange-rate changes; long distance – high transport and insurance costs and delays; risk of non-payment by foreign buyers and difficulty getting information about them; different laws, customs regulations, trade barriers (tariffs, quotas, embargoes); difficult documentation (bill of lading, certificate of origin, consular invoice etc.); different tastes, weights and measures and standards; political instability or war in the buying country; keen competition from other exporters.
Name each point, then explain it in a sentence or two.