Disadvantages of foreign trade

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

Topics in Commerce

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Academic Questions in Commerce

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In commerce, which of the following is false with regards to a commodity?

  • A. A commodity must always have a market value

  • B. Rendered services are also instances of commodities

  • C. Products applicable to commodities can be bought or sold with money

  • D. A commodity must be standardized

  • E. A commodity must be usable upon delivery

  • F. Commodities can be traded in the futures market

Whatever is being marketed must always provide value to its potential consumers.

  • A. True

  • B. False

Which of the following is not a branch of marketing?

  • A. Merchandising

  • B. Promotions

  • C. Forex

  • D. Search Media Optimization

  • E. Social Media Optimization

  • F. Copywriting

Which of the following is not a characteristics of commerce?

  • A. The only aim of commerce is to make profit

  • B. It is a discontinuous process after profit had been made

  • C. It is accompanied with challenges and uncertainties

  • D. It is 100% business and economic activity

  • E. Transaction processes are always involved in commerce

  • F. It connects the process of production and marketing

Which of the following is not a function of commerce?

  • A. Unnecessary in times of emergencies like earthquakes and wars

  • B. Facilitates mass production of goods

  • C. Influences transportation network within and outside a state

  • D. Attempts to satisfy human needs and wants

  • E. Improves the standard of living

  • F. Acts as an online business link between buyers and sellers

One of the following is a form of division of labour.

  • A. Agonistic division of labour
  • B. Antagonistic division of labour
  • C. Mutualistic division of Labour
  • D. Advanced division of labour
  • E. Solitary division of labour
  • F. Occupational division of labour

A place where people buy homogenous goods in large quantities is called _____.

  • A. Wholesaler's Market

  • B. Goods Market

  • C. Products Market

  • D. General Market

  • E. Commodity Market

  • F. Forex Market

Any activity aimed at getting people interested in a company's product or service is termed _____.

  • A. Commerce

  • B. Economics

  • C. Financial Accounting

  • D. Marketing

  • E. Production

  • F. Distribution

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 the 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.

Meanwhile, always understand that 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 occurs in societies because the importers of such substandard drugs care only about making money, thus importing them into the country.

Please read on the disadvantages of money here.

In some developing countries, importers may bring in substandard car accessories like break pads and tyres, ultimately leading 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.

The money generated from exportation should be judiciously utilized by exporting 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 the concept of demand here.


5. Unemployment

Unemployment will persist in nations that constantly import goods and services. This is true because these countries typically lack enough industries as a result of constant importation of basic products. As a result unemployment rate is increased.

You can read the introduction to 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.

The above facilities are necessary if a country sincerely plan to attract more investors into their land.

Please read on the 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 considered losers in a foreign trade.

For instance, Nigeria is an exporter of petroleum (as at 2019) 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.

If Nigeria as a nation had a refiney, the money spent on subsidies could have gone into capital projects. This will be more beneficial to the masses. However, Africa's largest refinery is currently being built in Lagos, Nigeria by Aliko Dangote.


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 for their products.

Also, understand that foreign trade can also foster hatred and cold war between countries.

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Amazing facts in Commerce

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Check it out here

The brewery, Sankt Gallen in Japan, produces a beer called Un Kono Kuro from elephant's dung

North Korea and Cuba are the only countries in the world where you can't buy Coca-Cola

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


prepayment is somewhat an opposition to deferred payment. This is true because the concept of prepayment oversees that the buyer makes payment beforehand and must wait to enjoy whatever had been paid for after some significant time had elapse.

In short, you can think of a prepayment as 'paying in advance'. An example is when a tenant pays in advance to a landlord for an apartment yet to be used. Another example is an online payment for items yet to be received.

Deferred payment is defined as a future payment eventually made after a buyer receives goods and services without an initial payment. Think of it as the: 'buy now, pay later' type of transaction.

From the perspective of the seller, the money yet to be received after the supply of goods or services is called an accrued revenue, unrealized revenue or accrued assets.

According to the buyer, the money yet to be paid after the delivery of goods or services is called an accrued expense. For instance, a company that owes employees salary can be said to have an accrued expense.

Please read more on deferred payment here

For an item to be considered a commodity, it must satisfy three conditions. These are:

  1. It must be standardized. In the case of agricultural commodities, they must be in their unprocessed state.

  2. It must be usable upon delivery

  3. The price of a commodity item must vary.

A commodity market can therefore be defined a place where people buy and sell homogenous goods in large quantities.

Homogeneous goods are products that essentially have the same physical characteristics (or qualities) as similar products from other brands.

It is noteworthy to state that foreign currencies, data and bandwidth have all been included as part of today's commodity markets. In this regard, a commodity market will always have it's own set of rules and regulations.

Please read more n commodity market here

Marketing is a broad field of study. Below are branches or divisions of marketing:

  • Advertising

  • Search Engine Optimization (SEO)

  • Merchandising

  • Branding

  • Promotions

  • Copywriting

  • Social Media Optimization (SMO)

  • Event planning

  • Customer Relationship Management (CRM)

  • Graphic Design

  • Internet Marketing

Marketing is defined as any activity or process aimed at getting people interested in a company’s product or service.

The processes utilized in marketing can take place via posters, public relations campaigns, handbills, social media, radio and television, buses, walls along the streets, the internet or just anywhere.

Below are some of the branches of marketing:

  • Advertising

  • Search Engine Optimization (SEO)

  • Merchandising

  • Branding

  • Promotions

  • Copywriting

  • Social Media Optimization (SMO)

  • Event planning

  • Customer Relationship Management (CRM)

  • Graphic Design

  • Internet Marketing

Please read more on marketing here