Foreign Trade

Subject: Social Studies and Population Education

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Trade is the act of buying and selling of goods between two parties with a view to earning a profit. This note has information about the foreign trade.
Foreign Trade

Trade is the act of buying and selling of goods between two parties with a view to earning profit. It makes a link between the producers and consumers. The parties or person involved in the trade is called traders.

Trade within Nepal

Traders buy goods in one part of the country and sell in other places inside Nepal. Fruits vegetables, animals, wood and some manufactured goods such as Coca-Cola and noodles move around like this. This is an internal trade.


Foreign Trade

Very few countries have everything they need. For example, many countries have no oil. So countries buy goods (import) from other countries and sell other goods (export) to other countries. It is good to sell more than you buy. This is trade surplus. If a country buys more than it sells, it has a trade deficit which means less money for investment and development. The patterns of foreign trade are very complicated, and an important part of world politics, but many LDC export one or two raw materials (such as coffee, sugar, cotton), while MDC export more expensive manufactured goods.

Importance of foreign trade

Some big countries such as India have tried a policy of being self-sufficient, that is not to trade at all with other countries, but only to use their own natural and human resources, and developing their own industries to supply all their own national needs. The importance of foreign trade are as follows: -

  1. If one country concentrates on a certain product, they can develop skills and knowledge and product very high-quality goods.
  2. It is sensible to use resources and tools in the place where they are found.
  3. Once the trade is established and more than local needs have to be produced, employment opportunities increase.
  4. The currency of the rich nations is reliable, so foreign trade enables us to earn this foreign currency, by selling our products.
  5. Many countries will buy our craft items, and this help to preserve our traditional art and craft skills, encouraging young people to learn them.
Present situation of foreign trade of Nepal

Nepal’sforeigntrade is in deficit. The trade is India-centered, but the government has started trade diversification by keeping trade relation with other countries. Nepal exports raw materials at a low price and imports manufactured goods at the high price. The main exports of our country are ready-made dresses, carpets, agriculture and forest-related goods. But the foreign market of many of our exports has declined recently.


Nepal'sforeigntrade is not prospering. It has many problems, which are,

  1. Too much import and too little export: Nepal's export mainly constitutes primary products or raw materials, which get a little price. In turn, it has to pay much more for its large imports which are mostly manufactured goods. Investors in Nepal are encouraged in trade so they trade more in foreign goods, which also helps to grow the volume of imports.
  2. Open border: Nepal borders with India on three sides. More than one-third of our trade is with India. Large quantities of goods move across the border through several secret routes. Consumers from each country collect their daily goods outside so that they get at the cheaper price. Due to such illegal trade practice, transaction statistics taken cannot be real.
  3. Landlocked country: Sea transport is a cheapest and most widely used system of transport for international trade. Being a landlocked country, Nepal is deprived of this cheapest system. It has to use Indian Territory to reach the sea. Transport is costly and goods become expensive. There is not an easy alternative way because our border with china in the north is geographically difficult and the sea their lies at the greater distance.
  4. Heavy import of luxury items: Nepali consumers are fascinated a lot of foreign-made luxury goods. The government also has the policy of importing such goods so that more customs duty can be charged. When a country wealth is drained out in importing luxury items, there is the lack of capital left for development of indigenous industries.
  5. Unaware consumers and irresponsible traders: Nepali consumers are easily moved by popular luxury goods of foreign brands. Their needs are created by others, say manufacturers and advertisers. Many traders are found smuggling goods across the border.

  1. Grow indigenous industries to supply consumer goods.
  2. Export more agro-products and forest product.
  3. Strict control over the border.
  4. Raise awareness among consumers for their love for national products.
  5. Develop trade relations with more countries other than India.
  6. Limit the import of luxury goods.
  7. Create a conducive environment to encourage Nepal investors to invest in industries.
  8. Modernized agriculture.

Things to remember
  • Trade is the act of buying and selling of goods between two parties with a view to earning profit. 
  • Nepal’s foreign trade is in deficit.
  • Traders buy goods in one part of the country and sell in other places inside Nepal.
  • The parties or person involved in a trade is called traders.
  • Sea transport is a cheapest and most widely used system of transport for foreign trade.
  • It includes every relationship which established among the people.
  • There can be more than one community in a society. Community smaller than society.
  • It is a network of social relationships which cannot see or touched.
  • common interests and common objectives are not necessary for society.
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Internal Trade
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Questions and Answers

Trade is the practice of buying or selling of goods and services for profit.

Our international trade is India-centric. Most of our imports are done from India. Our economy sustains with Indian help. As Nepal is small and less developed country we don't have much to offer for export. To improve the trade deficit Nepal must improve its output for trading. Better qualitative and expensive products should be encouraged for export. Our trade must diversify. We should trade keeping good relation with other countries.

International trade is important in Nepal for following reasons:

  • It helps to promote the relation with other countries.
  • It promotes the technology.
  • It promotes skill of people.
  • It makes people market competitive.
  • It supports maximum utilization of means and resources.
  • It helps to recognize the country in international market.
  • It promotes the economic condition of country.
Yes, there are more problems of Nepal's international trade, which are listed below:
  • Lack of technology for industrial development
  • Open border
  • More import and less export
  • Heavy import of luxurious goods
  • Landlockedness
  • ¬†Poor mobilizing of available resources
  • Lack of industrials as well as agricultural products

These problems can be solved by implementing following points:

  • Modern technology should be used.
  • Establish more industries.
  • Modernize agricultural sector.
  • Make easy policies for the establishment of industries.
  • Mobilize means and resources.

Nepalese trade highly depends on India. Lack of export of primary goods, import of readymade and manufactured goods, imports of luxury goods, high import cost, lack of study and research are some of the characteristics of Nepalese foreign trade.

If the things to be sold are of higher price than the things to be bought, it is considered as a trade surplus and if the things to be sold are lower price than the things to be brought, it is considered as trade deflect.

The benefits of trade of foreign in Nepal are:
  • Maximum use of means and resources.
  • Earning foreign currencies.
  • Less cost, better production.
  • Development of international understanding.
  • Skill development.
  • Technological development.
  • Growth in employment.

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