Foreign Trade and Foreign Investment
Globalization has changed the markets across the world in past few years. It has brought many positive changes that have made the trade among countries very easy and effective. Foreign trade and foreign investment are the two such positive changes as a result of globalization. Let us see how they differ from each other!
Foreign trade refers to the trade between two or more countries. In other words, it is the act of trading products and services in the international markets. It connects the markets of different countries across the world. It generally involves exchange of goods, services and capital of one country with another country. Foreign trade facilitates the availability of goods, which are produced in a different country, in the domestic market of a country, e.g. toys made in china are sold in the shops of your city. Thus, it helps provide a wide range of products and services in the domestic market. It also has a significant contribution to the gross domestic product (GDP) of a country.
Foreign trade can be of three types:
Foreign investment refers to the investment made by a company or organization in another country. In foreign investment, a company usually establishes manufacturing unit, sales and marketing offices etc, in another country. Thus, it is a huge investment made by a foreign company in another country to set up its offices or branches to grow its business. In simple words, foreign investment is the introduction of foreign capital from one country to a company based in another country. Thus, it helps move capital from one country to another country. It can occur in three different forms such as:
Some of the key differences between foreign trade and foreign investment based on the above information are as follows: