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Foreign Trade and Integration of Markets

For a long time foreign trade has been the main channel connecting countries. Even as early as the 8th century extensive trade took place between South Asia, including India, and the East and West. Trading interests attracted various trading companies such as the East India Company to India.

The benefits of foreign trade were tremendous:

1. Foreign trade created an opportunity for the producers to reach beyond the domestic markets, i.e., markets of their own countries.
2. Producers could compete in markets located in other countries of the world.
3. Expanding foreign trade gave consumers a wider choice of goods beyond what is domestically produced.

So, due to foreign trade and the integration of markets…

(i) Goods travel from one market to another.
(ii) Choice of goods in the markets rises.
(iii) Prices of similar goods in the two markets (where it is produced and where it is sold) tend to become equal.
(iv) Producers in the two countries compete against each other even though they are separated by thousands of miles!


Foreign trade results in connecting and integrating markets in different countries.

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