Foreign trade refers to trade with foreign countries. It means buying and selling of goods by one country with other countries. Foreign trade or international trade means the trade which is spread beyond the boundaries of a country.
It involves exchange of goods and services between the citizens of two or more countries. For example, India’s trade with UK, USA, and Japan is foreign trade.
Foreign trade can be of three kinds:
1. Import Trade:
It implies purchase of goods from a foreign country. Buying of oil by India from Kuwait is an example of import trade. India imports goods which it does not produce or which are in short supply. In import trade, goods are brought from abroad to the home country.
2. Export Trade:
It means sale of goods to a foreign country Selling of tea by India to England is an example of export trade. In export trade goods are sent from the home country for sale abroad.
3. Entrepot Trade:
It refers to purchase of goods from abroad for the purpose of sale to some other country. It involves both import and export of goods. For example, India may import oil from Iraq and export a part of it to Bhutan. Entrepot trade is also known as ‘Re exports.’