Each country’s economic development depends on trade policy they follow. Countries cannot totally depend up on domestic trade. So, they aim at building strong trade relations with other countries. The countries promote exports by providing attractive incentives and benefits. The countries main objective behind export promotion is to earn more of foreign exchange. It will help them in economically developing their country. Due to this reason country’s focus is on expanding exports.[i]

Exportation of products is the way through which large amount of foreign exchange could be earned. Now the question comes in, why the countries are so much involved in exporting its products? The answer is clear, they get a ready market which is easily accessible through which they can earn plenty of profits. The other question comes in mind is, why the countries import goods exported by other countries? They import only with an aim to get high quality products at low prices.

Due to numerous benefits, foreign trade is on the priority list of many countries. Under the authorization of foreign ministry of that country. Foreign trade policy includes both- export promotion and export management. The policy includes- goods including services to be exported or imported. A comparison of prices and quality of products is done before the transaction taking place. Whether the goods and services are to be exported or imported is checked according to the requirement. A due diligence is conducted on the country’s taxation policies, government role, export and import rules and regulations, EXIM policies etc. of the countries with which trade dealing will be done.

Examples of some of the goods and services exported and imported by different countries-[ii]

Country	Products	Export partners	Import partners
Canada	minerals, textiles, metals, stone and glass, food products etc.	USA, china, United Kingdom, Mexico	USA, china, Mexico.
India	fuels, hides and skin, footwear, plastic, and rubber.	USA, United Arab Emirates, china	USA, china, United Arab Emirates, Iraq
New Zealand	chemicals, animal and vegetable products, Mach, and Elec etc.	china, USA, japan, Australia	Germany, japan, USA, china
United Kingdom	transportation, hides and skin, footwear, metals	France, USA, Germany, Ireland.	Germany, china, USA, Netherlands.
Australia	textile, food products, fuels, stone, and glass.	china, japan, USA, India.	china, USA, japan, Thailand.

Foreign trade can be defined as business dealings conducted among countries. It involves swapping of goods including (capital goods) and services taking place across the borders of various countries. The countries which are having an excess of availability of natural resources, they export raw materials at cheap prices to countries which are deficient in it. The countries which have highly skilled man-force along with advance technology such countries export finished goods to those countries who lack such skills and technology. Foreign trade has acted as a boon to underdeveloped, developing and developed countries.[iii]

Objectives

The main aim behind international trade policy is to promote export and imports. It focuses on maintaining the balance between the two. In aims in providing stability. It creates a balance between countries by exporting and importing of goods and services. Foreign trade policy helps in providing continuity in markets. It provides various benefits like reduction in costs, improvement in technology etc. It even objectifies in increasing competitiveness, to make available a ready market for the dealers and uncover the hidden markets.[iv]

Foreign trade policy’s another important objective is to bring stability in prices. Foreign trade policy has also helped in creating employment opportunities. Due to trade in goods and services there is a constant movement of resources and labor force which has increased job opportunities in different fields. It helps in standardization of goods. It provides exploitation of underutilized resources and helps in avoiding wastage. it aids the underdeveloped countries to trade in goods and services at cheap prices which are not readily available in their home country. It even provides for product diversification.

Issues

Some of the key issues faced by international trade policy are-[v]

• The biggest issue is of distance between the exporter and the importer country, it causes great difficulty to trade.
• Insufficient information about foreign traders
• Quick transportation is not possible
• A lot of risk and uncertainty is involved
• Compliance of many rules is to be done and various documents have to be submitted regarding trade.
• The structure of foreign company- e.g., coca cola offers an effective structure.
• Rules, regulations, and laws of foreign country
• International accountancy
• Global pricing strategy- it includes fixing prices taking into consideration various factors governing a trade.
• Payment methods- the payment methods must be universally accepted otherwise it would be a create a major problem.
• Rates of currency- when there is fluctuation in currency rates, it is a big issue in foreign trade.
• Other issues include cultural and communication problems, tariff, and taxation, import quotas and exchange control etc.

International policy of United Kingdom

United Kingdom follows free and unrestricted trade policy. The economy of United Kingdom is totally dependent on international trade. Due to its strong value of the currency and progressive state of the economy, it has magnetized foreign investment. United Kingdom has come up to be the world’s second-largest country for foreign investment. Due to its dependency on the trade, United Kingdom has certain restrictions on investment and trade.[vi]

United Kingdom is also involved in importation of goods from many countries. Its import partners are- china, USA and Netherlands etc. earlier UK’s imports were more than exports that causes a trade deficit. After the attractiveness of foreign investor, United Kingdom has accomplished in financing this trade deficit as the constantly increasing foreign investment is more than the deficit. Foreign company have been providing 40% of United Kingdom exports and its presence can be felt in the manufacturing sector. Among the major foreign companies in British are DuPont, the sevirs chemical company ciba and coca cola as in the year 1998.

As India has formulated various policies and programmers for trade in special economic zones. United Kingdom has also adopted various policies to attract investors and to increase exports at the same time. United Kingdom has established enterprise zone with the direction of parliament. Companies in these zones various incentives, benefits and exemptions from taxes and benefits of cost reimbursement are also provided. They can set up new factories, places of business whose expenses are recompensated. Such benefits can last for 10 years.

Various other incentives are provided by the government for companies to set up their business in economically backward areas. These areas are also referred as assisted areas. There are seven free trade zones in United Kingdom like Birmingham, humberside, Liverpool, Prestwick, sheerness Southampton, tilbury etc. these free zones provide a repository of goods with tax exemptions and without any tariffs and import duties. [vii]Brexit has provided United Kingdom with an opportunity to commence independent trade policy. It would let British focus more on business growing outside the European union.

Foreign trade is dependent on trade agreements. If the exporter and importer country jointly agree on the terms of trade. Then the business can continue in a smooth manner. The trade agreement covers lots of issues including tariff on products. Along with tariffs other issues are intellectual property rights, investments, regulations relating to man force, consumer, competition etc. The trade agreements provide lots of benefits and help in removing different hurdles in trade. It helps in enhancing access to foreign markets. They can even be controversial at the same point of time. sometimes negotiations become very difficult.[viii]

Being a part of European union, United Kingdom aim must be in balance with other European union countries. On being separated from European union, United Kingdom will be able to focus on its priorities i.e., trade in services. United Kingdom will be able to build its own tariff structure and commence its own free trade agreements. The withdrawal agreement would enable United Kingdom to sign, negotiate its own foreign agreements during the transition period. This was not possible earlier unless European union agrees to it.[ix]

Exports and Imports of United Kingdom

The top exports of United Kingdom are cars with $43.4B, crude oil with $26.4B, gold with $25.8B and gas turbines with $23.5B exporting mostly to united states of America, Germany, Ireland, France etc. in the year 2018, United Kingdom was considered as the world’s largest exporter of aircraft parts with $15.4B, hard liquor with $8.11B, antiques with $918M.[x]

The top imports of United Kingdom are refined petroleum with $24.2B, packaged medicaments $17B, crude petroleum with $24.9B importation of goods is done mostly from Germany, china, Netherlands, USA etc. in the year 2018, United Kingdom was the world’s largest importer of preserved meat with $939M, self-propelled rail transport with $816M, railway passenger cars $714M, sausages $672M. United Kingdom borders Ireland by land and by sea.

Conclusion

In the end, international trade is considered as the most effective way to earn foreign currency, it provides a whole plethora of opportunities. A very well formulated foreign policy will help in economic development of the country. foreign trade helps in maintaining a balance. It also provides stabilization in prices. Trade agreements helps in removing various barriers to trade.

Frequently Asked Questions

What is foreign trade policy?

It is defined as the policy adopted by government of different countries regarding tariff, subsidies, export quotas etc. with an aim to increase exports and restrict imports. It includes a strategy to promote trade.

What are its objectives?

Foreign trade policy aims at increasing exports, helps in maintaining a balance of payments. It also aims in encouraging foreign trade. It focuses on increasing competitiveness and global integration.

What are the issues in foreign trade policy?

There is a time gap between placement of order and its delivery. The key issue faced is the distance between two countries, sometimes trade dealing becomes very difficult. There are hurdles related to tariff, quotas and other regulations governing a nation.

Reference

[i] The Institute of Company Secretaries of India, International Business-Laws and Practices, (2014)

[ii] Wits.worldbank.org

[iii] The Institute of Company Secretaries of India, International Business-Laws and Practices, (2014)

[iv] Ibid.

[v] www.globalsourcingblog.org

[vi] www.nationsencyclopedia.com

[vii] Commonslibrary.parliament.uk

[viii] Ibid

[ix] Ibid

[x] Oec.world