Concept of balance of payments and Balance of trade

1. Different in natural resources. Some countries are blessed with minerals resources some with oil, wealth, some with oil wealth, some with rich, agricultural and some with industrial expertise.
2. Geographical different. Counties sell what they are physically capable of producing and buy from other what they either do not here at all or here only insufficient quantities.
3. Different in human skills and productivity. Many developing countries have million of people who are illiterate and lacking technical administrative and managerial skills which lead them into substance peasant agriculture which developed countries people here high skilled engage into industrial products.
4. Uneven distribution of capital equipment around the world. Capital consisting machines tools, factories an essential factor of products, thus is north America and Europe west work is done machine while in Africa latin America and ASIA most work is done by hand this mean less can be produced per man, per hour and that production cost tent to be higher than in industrialized countries.
5. Political reason. A country may trade with another country basically for political reasons e.g. PTA, SADC, the reverse is thus, a country often refuse to trade with countries due to political disagreements.
6. Specialization and division of labour among countries. International trade enables countries to specialize in the production of goods and services they can produce most efficiently and cost-effectively. Through the division of labour, countries focus on specific industries where they have a comparative advantage. This specialization leads to increased global production, lower costs, and higher-quality goods. Countries then trade to obtain goods they do not produce, leading to mutual benefits.

1. It enable a country to get what she can not produce herself e.g. Tanzania import vehicle, heavy machine, crude oil etc
2. It enable a country to dispose (sell) off her surplus goods which would otherwise have to be destroyed.
3. It offer the greater variety of goods to the country. At the time of calamities e.g. flood, drought, famine, food and other supplies can be obtained from other countries.
4. It promote health competition among local producer to absence of international trade may establish a money and charge exorbitant prizes.
5. It promote friend ship and peace among nation since people moves from one country to another which led to international understanding.
6. It enable country to earn foreign exchange.

1. Price fluctuations and unexpected fall in demand. This is when a country is too much specialized on production of one commodity e.g. Zanzibar in clove.
2. When a country export mainly minerals it will run out of its deposit and end up with nothing else to export e.g. Zambia fails to intensify her industries and agriculture.
3. Some of the imported goods have adverse effects to the citizens of importing countries e.g. harmful drugs.
4. Problems of dumping i.e. importing expired items which their uses are out dated.
5. Political instability A stable political system is conducive to smooth business relationship with all party of the world problems of political instability may lead to civil strikes, wars sudden, political change etc.

Types / forms of international trade

1. Bilateral Trade This is trade between two countries. Each country agrees to buy and sell goods or services from each other. It can be based on formal trade agreements or informal exchanges. Example: Kenya trading tea with Japan in exchange for electronics.
2. Multilateral Trade This involves trade among three or more countries. It is often conducted under international trade organizations or agreements such as the World Trade Organization (WTO). Example: Trade among countries in the African Continental Free Trade Area (AfCFTA).
3. Entrepôt Trade Also known as re-export trade, this occurs when a country imports goods and then exports them again to another country after storing, processing, or repackaging them. Example: Dubai imports gold from Africa and exports it to Europe.
4. Visible Trade This refers to the trade in physical goods (tangible products) such as machinery, food, clothing, cars, etc. It is also known as merchandise trade. Example: Export of coffee from Ethiopia or import of vehicles from Japan.
5. Invisible Trade This involves the trade in services (non-tangible products), such as banking, insurance, tourism, transport, and consultancy. Example: A Kenyan tourist visiting South Africa contributes to South Africa's invisible trade.
6. Export Trade This is when a country sells goods or services to other countries. It brings foreign currency into the exporting country. Example: Tanzania exporting cashew nuts to India.
7. Import Trade This is when a country buys goods or services from other countries to meet local demand or fill production gaps. Example: Uganda importing mobile phones from China.