Explain the concept of foreign trade and its types.

Answer: Foreign trade is the exchange of goods and services between two or more countries; its types are import trade, export trade and entrepot trade.

Concept: Foreign (international) trade means the exchange of goods and services across national borders. It arises because countries differ in natural resources, climate, skills and technology, so each specialises in what it can produce most efficiently and exchanges it for other goods.

Types:

1. Import trade: Purchase of goods and services by one country from another, e.g. India imports crude oil from Gulf countries.
2. Export trade: Sale of domestically produced goods and services to other countries, e.g. India exports software services, tea and textiles.
3. Entrepot (re-export) trade: Importing goods from one country and, after processing or packaging, re-exporting them to another country, e.g. importing raw diamonds, cutting and polishing them and exporting them.