Disadvantages of Foreign Trade

len Alfred Ajibola - Wed, 18th December, 2019 @ 11:13: AM

Topics in Commerce

Principle of Marketing: Positioning as a Marketing Mix Principle of Marketing: Packaging as a Marketing Mix Elements of Promotion in Marketing Mix Principle of Marketing: Promotion as a Marketing Mix Principle of Marketing: Place as a Marketing Mix Principle of Marketing: Price as a Marketing Mix Principles of Marketing: The 7 Ps of Marketing Mix Factors necessary for Division of Labour Disadvantages of Division of Labour Advantages of Division of Labour Outbound Marketing explained Inbound Marketing explained Production - Types of Production Commerce: Definitions and Scopes of Commerce Differences between Balance of Trade and Balance of Payments Balance of Payment Deficit and Balance of Payment Surplus Disadvantages of Foreign Trade Divisions of Foreign Trade Advantages of Foreign Trade What is Foreign Trade? Types of Foreign Trade

Academic Questions in Commerce

Please check out our Test Your Knowledge page to see all Questions and Answers

The followings are principles of marketing mix except _____.

  • A. People

  • B. Positioning

  • C. Pressure group

  • D. Packaging

  • E. Promotion

  • F. Product

The followings are advantages of division of labour EXCEPT _____.

  • A. It promotes the use of machines in production industries
  • B. There is an increase in profit
  • C. It saves time and expenses of training
  • D. It fosters the spirit of division
  • E. It increases the production of quality goods and services in the market
  • F. It increases a country's economic growth

Which of the following statement is incorrect concerning division of labour?

  • A. It is the specialization of works
  • B. It can become monotonous
  • C. It is the specialization of processes
  • D. The nature of a job is not a condition for division of labour
  • E. A person performs only a part of the job
  • F. Division of labour has some of its drawbacks

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Disadvantages of Foreign Trade:

Despite the many advantages that foreign trade (or international trade) has shown, it still has some of its setbacks.

Please read on the Advantages of Foreign Trade here.

Below are some disadvantages of foreign trade:

1. Suppression of Infant Industries

An infant Industry is defined as a new industry (in its developmental stage); and is likely to experience difficulties especially against established competitors abroad.

When goods, products and services are imported from abroad, infant industries will become suppressed and may eventually fold up.

You can read on Production here.

Note: Infant industries are crucial for the development of a nation.


2. Importation of Substandard and Harmful Goods

Many people have died because of the drugs they had taken. This results because the importers of these substandard drugs care only about making money, thus importing them into the country.

Please read on the Disadvantages of Money here.

Note: Similarly, importers bring in substandard car accessories like break pads and tyres. These has lead to the death of innocent citizens


3. Potential suffering from the Misuse of Natural Resources

An excessive export of natural resources to other countries will result to a gradual reduction of the natural resources until it becomes exhausted.

For instance, Nigeria is a major exporter of petroleum.

The current volume of petroleum in Nigeria is much lesser compared to what was present during its discovery. This is a result of constant exportation of petroleum.

Note: The money generated from exportation should be used judiciously utilized (by countries) in order to sail through the rainy days.

Please read on Balance of Trade and Balance of Payments here.


4. Economic Instability

Too much importation of goods from other countries will negatively affect the economy of the importing countries. As a result, their currencies have little or no value.

Please read on Demand, Law of Demand and Demand Schedule here.


5. Unemployment

Unemployment will persist in a nation that constantly import goods and services. This is true because these countries lack industries. As a result unemployment rate is increased.

You can read on the Explanation of Foreign Trade and Types of Foreign Trade here.


6. Hinders National Growth and Development

Those who make huge amount of money from importation may deliberately work against national growth by supressing the necessary facilities like constant power supply and good road network.

Note: The above facilities are necessary if a country intends to attract more investors into their land.

Please read on Advantages of Land Mode of Transportation here.


7. Difficulty in times of War

Countries that depend on importation will suffer during the times of war. This is true because supplies to such countries will be cut off by enemies thus making them vulnerable.


8. Exploitation of some Countries

Countries that export raw materials and import the finished products of their raw materials are actually cheated in a foreign trade.

For instance, Nigeria is an exporter of petroleum but ironically, she buys the products of petroleum like petrol and kerosene.

Please read on the Divisions of Foreign Trade here.

The Nigerian government understood the burden this would cause on her people; and as a result, they constantly subsidize these products especially petrol.

Note: The money spent on subsidies could have gone into capital projects. This will be more beneficial to the masses.


9. Cause of War

Some of the wars that happened in the past are considered to be caused by countries trying to secure international markets from their products.

Note: Foreign trade can also foster hatred and cold war between countries.

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Alfred Ajibola is a Medical Biochemist, a passionate Academician with over 7 years of experience, a Versatile Writer, a Web Developer, a Cisco Certified Network Associate and a Cisco CyberOps Associate.

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Amazing facts in Commerce

Amazon is an e-commerce website launched in 1995. It did not make any profit for its first seven years.

Amazon's first profit was in 2003. Its founder 'Jeff Bezos' is the richest man in the world as at 2018/2019


Commerce can be defined as the exchange of goods and services, usually for money and on a large scale that will require the transportation of such goods and services.

Commerce is crucial (important) to the life of any Nation for the following reasons:

  1. Commerce facilitates the exchange of goods and services which everyone can enjoy, regardless their location or whether the goods is produced within or outside their country.
  2. Commerce creates an awareness of the existence of goods and services through advertising.
  3. Commerce offers employment to a very large number of people in a Nation.
  4. Commerce promotes rapid transfer of both oral and written messages through communication.
  5. Commerce determines the standard of living in a Nation. This is because the extent of commercial activities is crucial to wealth of  a nation.
  6. Commerce makes for the protection against risk in day to day business operations.
  7. Through commerce, there is a steady supply of goods in a Nation. This is because commerce ensures that goods produced are stored until needed.

Please read on the functions and characteristics of commerce here

A public company is not owned by an individual; rather it's usually owned by groups or a large number of people.

The shares of a public company are traded freely on the stock exchange.

Below are some features of a public company:

  1. A public company must receive it’s training certificate to commence business.
  2. The minimum membership is two while the maximum membership is limitless.
  3. A public company has a legal status. It can sue and be sued.
  4. A public company files and publishes its annual reports, including its accounts.
  5. The liability of its members is limited.
  6. The shares are easily transferrable through the stock market.
  7. A public company can issue debentures to be secured as its assets.

Please read on Limited Liability Company, Its Advantages and Disadvantages here

There are seven elements of the marketing mix. These are:

  1. Product: Anything thing that satisfies a consumer’s need is referred to as a product. Product may come in the form of manufactured goods, raw materials or services.
  2. Price: Price is defined as the exchange value of goods and services supplied. In simple terms, it serves as a mechanism of exchange.
  3. Promotion: It involves all the processes that concerns with how business organizations should inform their customers about its product. If done properly, the demand of product will be increased. Promotions can take the form of advertising, search engine optimization, social media marketing, trade fairs exhibition and so on.
  4. Place: The place as a marketing mix concerns variables such as location and transport facility where the distribution of goods and services take place.
  5. Packaging
  6. Positioning
  7. People

Think of marketing mix as the set of marketing tools that an industry or company uses to drive or accomplish its marketing objectives in the target market

Please read on the Principles of Marketing Mix here