The first theory section of this course develops models that provide different explanations or reasons why trade takes place between countries. Imports. International trade is the exchange of goods and services between two (or more) countries. And yet, while trade might be the gateway to development, the statistics in Africa aren’t too impressive, especially when it comes to one of the biggest opportunities for growth: trade among African countries. On the other hand, the supply of cotton textile by India to the U.S.A. and the European countries, iron ore to Japan and rice to the Middle East countries and purchase of wheat from the U.S.A., oil from Iran and electronic goods from Japan, are such transactions that take place among the different countries and these transactions constitute the international trade of the country. There are the key reason why countries trade with each other. To raise the standard of living. 1. Introduction In 1776 Adam Smith stated, "If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage." Why do nations trade with each other? Since no country can produce or manufacture all the things that it needs, there is always the need for countries to trade with other countries that have what they need. Absolute Advantage. Each country has a different allocation of natural and human resources. A given country will be well suited to the production of some goods (or the provision of certain services) and totally unsuited to the production of others. The five basic reasons why trade may take place are summarized below. Why do countries trade with each other? When the first civilizations did begin trading with each other about five thousand years ago, however, many of them got rich…and fast. Goods and services going out of a country. Before we go down that road, it is important to understand the fundamental reason why countries trade. When a country imports more then it exports. I will show you the REASONS TO ENGAGE INTERNATIONAL BUSINESS. Trade between developed and developing countries. In 2014 in Europe, for example, 69% of exports were to other countries on the continent. When goods (services) are brought in, it is called import and when goods are carried out its called export. Exports. International trade has existed since time immemorial and will keep on existing simply because the world cannot do without it. Difficult problems frequently arise out of trade between developed and developing countries. REASONS TO ENGAGED INTERNATIONALBUSINESS All organizations, irrespective of their size, are keen toenter in to international business. Are there any disadvantages for international trade? 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