a) What is entrepôt trade?
b) State three advantages and three disadvantages of international trade
Explanation
(a) Entrepôt trade involves the importation of goods from one country and re-exportation of the goods to another country.
(b) (i) Advantages of International Trade:
- International trade widens the market for goods;
- It avoids wastage because countries can dispose off the goods they have in excess;
- It improves the standard of living because countries can enjoy what they cannot produce;
- It creates more jobs as in transporting, selling, manufacturing because of the need to increase production to meet foreign demands;
- It brings about specialization and mass production which in turn results in lower unit cost of the product;
- It generates revenues for the countries involved;
- It fosters international relations;
- It encourages the transfer of technology;
- It promotes economic development.
(ii) Disadvantages of International trade:
- It kills local industries whose products cannot compete with those from developed countries;
- It puts the country into perpetual dependency on foreign goods;
- It leads to dumping;
- It may lead to the importation of harmful goods;
- It creates unemployment in importing countries;
- It leads to unfavourable balance of payment.