Why do nations trade with each other? Trade among nations is taken as a sign of good intention and a means of preserving non-hostile diplomatic relations. Absolute Advantage. There are the key reason why countries trade with each other. In 2014 in Europe, for example, 69% of exports were to other countries on the continent. International trade has existed since time immemorial and will keep on existing simply because the world cannot do without it. Exports. The first theory section of this course develops models that provide different explanations or reasons why trade takes place between countries. Why does a country need to trade with other countries? Are there any disadvantages for international trade? Difficult problems frequently arise out of trade between developed and developing countries. To raise the standard of living. When a country imports more then it exports. 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. I will show you the REASONS TO ENGAGE INTERNATIONAL BUSINESS. Trade Deficit. Why do countries trade with each other? Each country has a different allocation of natural and human resources. Imports. Goods and services going into a country. The five basic reasons why trade may take place are summarized below. 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. REASONS TO ENGAGED INTERNATIONALBUSINESS All organizations, irrespective of their size, are keen toenter in to international business. International trade is the exchange of goods and services between two (or more) countries. Before we go down that road, it is important to understand the fundamental reason why countries trade. 1. Goods and services going out of a country. When goods (services) are brought in, it is called import and when goods are carried out its called export. 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." 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