INTRODUCTION

International trade; Is the the trade among nations. It involves selling and buying
goods and services to and from abroad respectively. Selling abroad is known as
exporting, and buying from abroad is known as
importing,”(Chrisdom.M.Ambilikile,2010).

Reasons for international Trade

A) Differences in Natural Resources; Some countries may have certain natural

resources such as minerals and fertile soil, while other countries have different natural
resources such oil reserves. Therefore, there is a need to exchange the goods which
are produced by these natural resources. Fore example, the Abic countries have
natural oil reserves while the African countries have fertile soil. Therefore, African
countries produce and export agricultural products to the Arabic countries; in return,
the Arabic countries produce and export oil to most of the African
countries.(c.m.ambilikile)

B) Gain from internal trade; Another reason for the existence of international trade
is gain from trade. Countries earn revenues and profit by engaging in international
trade.

C) Differences in human skills; Citizens of different countries have different skills.

These differences in skills result in differences in types of commodities which are
produced, thus necessitate the need for exchange of commodities among countries.
For example, Tanzania has people who are very skilful in making carvings, while
America, Japan and European countries have people with skills in industrial
manufacturing. Therefore, Tanzania is able to produce and export carving to these

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countries, and in turn import manufactured goods from the same
countries.”(C.M.Ambilikile)

D) Uneven distribution of capital and technology; Capital and technology are

unevenly distributed among countries. Therefore the countries without enough capital
and technology are forced to import goods from the countries with the capital and the
technical capacity of producing goods. For example, most African countries are
forced with the problem of lacking the capital and technology to produce goods, there
is hence a need to engage in international trade so as to export the raw materials and
import the manufactured goods such as cloth, cars, electronic equipment,
etc,”(C.M.Ambilikile)”.

Theories of International Trade

International trade theories are simply different theories to explain international trade.
Trade is the concept of exchanging goods and services between two people or entities.
International trade is then the concept of this exchange between people or entities in
two different countries.

People or entities trade because they believe that they benefit from the exchange.
They may need or want the goods or services. While at the surface, this many sound
very simple, there is a great deal of theory, policy, and business strategy that
constitutes international trade,”(C.M.Ambilikile).

1. Mercantilism theory of international trade

According to wild, 2000, the trade theory that states that nations should accumulate
financial wealth, usually in the form of gold, by encouraging export and discouraging
imports is called mercantilism.

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It states that other measures of nations well being such as standard of living. The
practise of mercantilism theory vested upon three things which are (a)Trade surplus;
Nations believed that they could increase their wealth by maintain a trade surplus.

A condition that resulted when the value of nations export is greater than the value of
it is import. In mercantilism a trade surplus meant that a country was taking is more
gold on the sales of it is was paying out for it is imports.(b) Government activity
intervene in international trade to maintain a trade surplus.[http

2. Absolute Advantage(1776) “Adam smith”. The theory is about “ The ability of

nation to produced a goods more efficiently than any other nations.

Nation with a absolute advantage can produce a greater output of good or services
than other nations using the same amount of a fewer resources.

Among other things, Smith reasoned that international trade should not be banned or
restricted by tariffs and quotas but allowed according to market force.

A country could concentrated on producing the good in which it hold on absolute

advantage then it could take with other nations to obtained the goods it need but it not
produced.

3. Factor proportional theory; The theory state that countries produce and exports
goods that require resource or factors that are abundant and import that require
resource in short of supply.

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4. Product international life cycle; The theory starting that a company will began by
exploiting its products and later undertake foreign direct investment as the product
through it is life cycle.

5. New trade theory: The theory state that a) There are given to be made from
specialization and increasing economies of scale, b) The companies first to market
can create barriers to entry mode b) Government may play a role in assisting it is
home companies.

6. National competitive Advantage; The theory starting that a nations

competitiveness in Industry depends on the capacity of the industry to innovate and
upgrade.

Reasons why it is undesirable to rely completely on International

trade.

(i) Decline of Domestic Industries; International trade compels the local firms to
engage in competitions with the foreign giant firms which use more efficient
techniques of production. Such competition lead to the collapse of domestic firms
because of failing to complete against the foreign firms.[C.M.Ambilikile2010]

(ii) Some of the Import are Harmful to the Citizens; For the sake of making profit,
traders may import goods which may have economic, social and natural effects.
Example of such goods are marijuana, cocaine, expired food and drugs, second hand
goods, romantic literature, etc.[C.M.Ambilikile2010]

(iii) Dependency; International trade influences specialization among countries. Too

much specialization may lead to dangerous to a country since it makes the country
dependent on other countries for the supply of essential goods. These cause

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difficulties to the importing country when it faces problems of foreign currency, in
which it can fail to import the essential goods. Dependency may also be a source of
neo- colonialism.[C.M.Ambilikile2010]

(iv) Problems of Unequal Exchange; Most of times, less developed countries faces
unfavourable terms of trade because they export primary product, which have low
price elasticity, and import manufactured goods which have high price
elasticity.[C.M.Ambilikile2010]

(v) Defect of Specialization; Too much specialization often leads to problems when
the demand for the commodity decline in the world market. This shows why it
undesirable to rely completely in international trade.[C.M.Ambilikile2010]

(vi)Unequal Exchange and Exploitation of Resources; International trade may lead

to massive exploitation of a countries wealth due to unequal exchange and transfer to
abroad.[C.M.Ambilikile2010]

Problems faced by Developing countries in International Trade

(a) Decline of terms of trade; Most of the products that produced are produced by
developing countries are sold at low prices due to reasons such poor quality, over
supply of the products discovery of synthetic substitutes and weak bargaining
power.[C.M.Ambilikile2010]

(b) Dependency on international trade; Most of developing countries are

dependent on international trade for their development. For example, most of these
countries depend on export sectors to earn their income, theretofore in case of price
fall; the economies of these countries suffer greatly. Also, these countries depend on
import trade to acquire most of essential commodities such as oil; this make them so
vulnerable when the price of import rises.[C.M.Ambilikile2010]

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(c) Protectionism policies of developed countries; Developed countries of ten
imposed different kind of protection measures against goods from less development
countries ; it lead to fall in the exports of the products to developed
countries.[C.M.Ambilikile2010]

(d) Several external debt due to deficit in balance of payment; Export earning are
low than the payments for imports due to the low price of export; this force
developing countries to depend on foreign aid to finance it is import, hence an
increase in foreign debt.[C.M.Ambilikile2010]

B. MEANING OF SELF SUFFICIENCY

Self sufficiency ; Is the state of not acquiring any aid , support or interaction for
survival. The country is termed as self sufficient countries it able to supply it is own
need without external resistance.[http//2012books.landbucket.org> book]

The county should be self sufficient when is able or it is self sufficient

in the following.

1) Self sufficient food supply; The country should be self sufficient when the
countries it is able to supply food to it is citizen and the food supply should be enough
for the the need of the people within the country, the term self sufficient means the
countries should not trade with outsiders because it self sufficient, therefore the
country will be self sufficient when it is able to supply enough food to the citizens.

2) When there is sustainable renewable energy; The country should be self

sufficient when there is sustainable renewable energy in side the country, the energy
which will satisfy the need of energy within the country, if the country it is able to
generate enough energy to be used within the countries there is no need for the
country to trade with outsiders.

3) When the product produced satisfy the domestic market; The should be self
sufficient when the products produced are all consumed within the local market, the

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self sufficient concept means the country it does not trade with other, if the products
consumed within the domestic market there is no need for international trade.

4) When there is sustainable agriculture; The countries should be self sufficient

when there is sustainable agriculture, the sustainable agriculture within the country
ensure the availability of food within the country.Therefore when there is sustainable
agriculture there is no need for the the countries to trade with other countries to secure
food availability within the country.

5) When there is sustainable living ; The sustainable living means nothing is

consumed than what is produced by the country the people within the country
consumes only produced by the country. The country should be self sufficient when
there is sustainable living within the country.

6) When a country produced it is own good and services; The country should be
self sufficient when it has the ability to produce it is own goods and services because
the term self sufficient means the country it does not trade with other countries, so
that if the country reach at this point whuch it is able to produce it is own goods and
services the country should be self sufficient.

Conclusion

The international trade has great influence to the economic development of the
country so that the government should promote trade among nations and remove all
the challenges that faced by the international trade so as to bring the the economic
development of the country.

REFFERENCES

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Chrisom.M.Ambilikile2010.Economics for advanced level paper two

Anamekwe, C. (2001),: problems faced by developing countries in international trade

and prospects. Being a paper presented at workshop in Grass- root Advocacy and
Economic Development, September 11- 13.

Arinaitwe, J.K.(2006) condition of a country to be self sufficient: a developing

countries analysis, Journal of American Academy of business, cambridge, vol.8 No.2,
pp.167-78.

Back, Thorston, Ash Dermigue- kunt, and Vojislar Marksimovic. 2004a. “Bank
competition and Access to finance:Internal and international trade Evidence.” Journal
Money, credit and Banking 36,627-48.

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 NATIONAL INSTITUTE OF TRANSPORT
(NIT)

DEPARTMENT OF BUSINESS AND ENTREPRENEURSHIP

STUDIES

MODULE: INTERNAL BUSINESS

SUBJECT CODE: BBU 07421

LECTURER: KHALIDI KICHAWELE

TASK: INDIVIDUAL ASSIGNMENT 1

STUDENT'S NAME: ALLY JUMANNE

ADMINISTRATION NO: NIT/BBA/2016/440

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SUBMISSION DATE: 21-05-2018.

QUESTION:

A.Why is it undesirable to rely completely on International trade.

B. To what degree should a country be self sufficient?

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