Page 33 - International Marketing

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BRILLIANT'S Introduction to International Marketing 35

supply of coffee and sugar while UK consumers obtain the major portions
of their food stuffs and the entire supply of tea from foreign countries.
Foreign trade leads to an increase in overall employment. For
example, 4 out of 5 new manufacturing jobs created during 1978-82 in
the U.S.A. were in export related industries. Development of exports and
imports gives a fillip to auxiliary services such as transport, shipping,
banking and insurance which further increases employment.
Countries rely on foreign trade not only to obtain domestically non-
available goods but also for the disposal of their products. In some cases,
the degree of dependence being substantial. For example, the Indian
producers of jute manufacturers and tea are mainly dependent upon export
markets. Japanese industry is mainly dependent upon exports for its
prosperity. In many cases, the existence of an export market enables the
producers to increase their production and thus, avail themselves of the
economics of large scale production.
If industries prosper, investors too get good returns. If foreign trade
and investment are free, there is a good possibility of investing in other
countries too if the return in the domestic market is not satisfactory. That
explains why investments are flowing to countries like Hongkong and
Singapore where there are good prospects of higher return.
As tax payers, we are interested in foreign trade as the cost of imported
goods is higher than what it would be in the absence of import duties.
Importance of customs duties can be realized by the fact that they
contributed 35.5% of the total tax revenue in India in 1996-97. Again, in some
cases exports are subsidized at the cost of tax payers. For example,
India subsidized exports to the extent of ` 1,300 crores in 1990-91.
Basis of International Trade
International trade encompasses all business activities that involve
exchanges across national boundaries. Thus, a firm is engaged in inter-
national business when it buys some portion of its input from or sells
some portion of its output to an organization located in a foreign country.
The basis for international trade is that a nation can import a particu-
lar goods or service at lower cost than if it were produced domestically. In
other words, if you can buy it cheaper than you can make it so you buy it.
 This Mexim is true for individuals and nations.
 This is called specialization and exchange.
International trade is based on the territorial division of labour. In this
respect, it differs not at all from domestic trade. International trade arises
because a country specializes in the production of certain goods and
services and thus produces more than enough to supply the domestic
demand. Obviously it must export the surplus to continue the specializa-