Trade

The action of buying and selling goods and services is called trade. It involves transfer or exchange of goods for moneyIt is essential fo the satisfaction of human needs/wants.Broadly they are two types of trade are as follows:

Internal Trade

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.

External 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 international 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 international 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

Even countries which could be self-sufficient are now entering into world trade. Increasingly all countries are waiting to join in free world trade. So there must be advantages! However, poorer countries with only one or two raw materials to export may be always in danger: too much of their product causes low prices, but the harvest fails there may be insufficient to export, or world demands may change.

So there are dangers as well. But let's look at the advantages.

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

International trade for Nepal

Nepal's international trade 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 international market of many of our exports has declined recently.

Nepal's international trade is not prospering. It has many problems, which are ,

 

• Too much import and too little export
• Open border
• Land-locked
• Heavy import of luxury items
• Unaware consumers and irresponsible traders

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.

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 a cheaper price. Due to such illegal trade practice, transaction statistics taken cannot be real.

Land-locked
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.

Heavy import of luxury items
Nepali consumers are fascinated a lot by foreign-made luxury goods. The government also has a 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 a lack of capital left for development of indigenous industries.

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.

Solutions measures

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

Trade Diversification in Nepal

The process of expanding trade or different items to different countries by not being limited only to specific goods and countries is called trade diversification.Many different factors can lead to trade diversification. A business may, for instance, become quite successful with one product and use its success to launch another product under the same brand. The development of new technology can also lead to diversification as technological advancements often allow for the development of new products. In some cases, diversification can lead a business to further success, thereby setting the foundation for further diversification.Trade can be diversified in two ways they are :

• Regional or Country wise diversification
• Goods wise diversification

Importers	Exported value in 2010	Exported value in 2011	Exported value in 2012	Exported value in 2013	Exported value in 2014
World	874,201	907,634	870,663	863,258	900,859
India	570,594	614,379	601,181	578,091	584,107
United States of America	54,654	70,282	56,489	68,236	75,372
Germany	35,733	40,902	29,514	33,534	32,341
China	13,628	10,214	21,914	20,235	28,010
United Kingdom	17,673	19,816	13,746	19,472	20,583
Bangladesh	59,994	26,037	37,945	17,067	18,636
Turkey	8,818	7,493	9,611	11,642	16,870
Afghanistan	14	117	3,634	12,064	15,824
France	16,682	15,632	10,479	12,521	12,382
Italy	9,528	10,629	8,232	9,563	11,873
Japan	8,188	9,180	8,983	10,916	11,432
Canada	11,333	11,627	7,100	8,340	8,666
Australia	4,035	4,639	3,687	5,319	5,843
Viet Nam	780	3,314	3,663	2,756	4,812
Netherlands	3,938	4,892	4,036	4,288	4,730
United Arab Emirates	2,335	5,954	3,680	4,076	4,034
Spain	2,979	4,287	2,384	2,843	3,649
Malaysia	430	1,376	875	2,278	3,494
Switzerland	2,905	2,993	1,862	3,194	3,227
Belgium	3,226	3,740	1,973	2,572	2,966
Sudan (North + South)	61	54	2,782	13	2,821
Thailand	240	2,189	5,277	4,130	2,620
Denmark	2,716	2,448	1,843	2,604	2,281
Norway	547	910	614	994	2,098

Regional or country wise diversification

The expansion of the trade of a particular product or country to a more geographical area is called Regional/country wise diversificationThey produce certain goods according to the available natural resources,technologies and manpower for their local market as well as the world market as far they can.It grows up the financial speed of a county.Such diversification helps a lot to flourish the trade.Nepal's foreign trade as limited only to India since the past.After the trade relation was made between Nepal and Tibet,import and export initiated with Tibet also .Nepal used to import salt,wool,sheep,goats etc from Tibet.Similarly, Nepal used to export rice,flour,chilies,sugar etc to Tibet.The fourth-five plan had adopted the principle of trade diversification.Nepal has now started to produce export quality goods and earns foreign currency by exporting them to many countries in the world.

Goods wise diversification:

Good wise diversification is the process of including different items for export.Territorialdiversification may not be enough for the promotion of trade so that every country tries to expand the variety of its export items also.This helps to increase the total volume of exports and the total income.Foreign trade should not be limited only to the production and sale of few goods and should produce and sell new goods according to the demand of world market.If we see Nepal's foreign trend we can find the good wise diversification increasing more than before.Nepal has export like oil cake,wood,maize,rice,pulse etc but nowadays it has been exporting handicrafts,woolen materials,readymade leather goods,silver jewellery,tea,carpet,leather,medicinal herbs,pulse,cardamom etc to India.Because of it,a kind of positive sign has been seen in Nepal's foreign trade.It would be better to earn more foreign currency if we could export readymade items rather than raw materials.