List and explain five problems associated with international trade.
Explanation
There are so many problems associated with international trade, but the following can be identified
(I) Distance: The cost of freight. whether by road, air or sea is high, as well as the risk of loss or damage since most merchants do not always take Insurance policy.
(ii) Difference in Currency: Fluctuations in the exchange rate may work against the volume of transactions as well as the non-availability of foreign currency.
(iii) Difference in Language is a serious setback in international trade: Most countries experience translation problems which result in loss of accurate meaning to words and terms. – Also understanding communications among countries becomes more difficult. – Engagement of interpreters involves extra cost.
(iv) Difference in Culture plays important role in slowing down the face of international trade – In particular, the choice of symbols, signs and trademarks are limited since the country may not understand them. – Cultural taboos inhibit trade.
(v) Difference in legal system emigration laws: – Business is not regulated by the law of the importing country but by international law. There is a need for the knowledge of other countries laws, to assist countries/businessmen in trade transactions.
(vi) Difference in weights and measures: The issue of weight and measures creates a problem of conversion from imperial to metric system. etc.
(vii) Political instability: The issue of frequent change of government and rampant coups as well as wars and disagreement among nations disturb trade.
(viii) Imposition of tariff – quotas, exchange control: -Flexible customs regulations and tariff limit the extent of foreign trade.
(ix) Documentation: Too many documents are required which involve extra cost and personnel, thereby slowing down transactions among nations.