What are the Disadvantages of Foreign Trade?

1. Economic dependence:

Too much dependence on imports may undermine the economy of a country. Developed countries may economically exploit the underdeveloped countries which have to depend for their economic development on the former. There may be colonisation of weak nations.

2. Restricted growth of home industries:

Foreign trade may discourage the growth of domestic industries. Unrestricted imports and foreign competition might pose a threat to the survival of infant and upcoming industries in the country. Dumping policy of developed nations may cause harm to underdeveloped nations.

3. Misuse of natural resources:

Excessive exports may cause quick depletion of natural resources of a country. Foreign trade may promote lopsided development if only those goods which have comparative cost advantage are produced in a country.

4. Political exploitation:

Foreign trade may create economic dependence which may threaten political independence. For example, the Britishers came to India as traders and ultimately ruled the country for centuries.

5. Import of harmful goods:

Import of luxury goods, spurious drugs, etc, may cause harm to the well-being of people. Exports of essential commodities may result in shortage of these goods at home and people suffer due to inflation.

6. Rivalry among nations:

Intense competition for exports may lead to rivalry among nations. It may hamper international cooperation. Foreign trade creates rivalry amongst nations due to competition in foreign markets. Unhealthy competition may lead to conflict of interest and eventually to wars between nations.

7. Invasion of culture:

Foreign trade may lead to invasion of a country’s culture. Young citizens of poor nations get accustomed to foreign consumption pattern and lifestyles.