Question

what is the difference between foreign trade and foreign investment ​

Answer 1

Answer:

The differences between foreign trade and foreign investment are discussed in the following points in detail:

Exchange of goods and services across the national borders of the country is known as foreign trade. On the contrary, Foreign investment implies the type of investment that a company or individual from a country makes, in the equity of the company located in another country.

Every country does not possess all the resources, and that is why, foreign trade is required, to fulfil the demand for the resources which are deficient in a country. Conversely, foreign investment tends to fulfil the capital requirement of the company, from the source outside the country.

Foreign trade connects the markets of different countries of the world. In contrast, foreign investment brings additional investment to the company in the form of money, technology and other resources.

Foreign trade creates a good opportunity for the domestic producers to capture global markets and increase their overall reach. As against, foreign investment tends to bring long-term capital in the company and that too in foreign currency.

The primary objective of foreign trade is to earn a profit and create an impression in the international market. Unlike, a foreign investment which is made with an objective to generate returns in the long term and have an ownership stake in the company based in another nation.

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Answer 2

Explanation:

definition of foreign trade:

Foreign trade can be understood as the act of trading products and services in the international markets. It facilitates the availability of goods in the market of the country, different from where it is produced. It results in the increase of choice of goods, as the prices of the similar goods are almost equal. Therefore, the producers compete with one another.

Foreign trade occurs in the form of import, export and entreport.

Foreign trade is subject to trade policy which are the directive principles and the control measures, that helps in administering the exports and imports of the country

Definition of Foreign Investment

Foreign investment implies investment made by foreign nationals or foreign corporates in substantial proportion in the domestic company, in that they hold extensive ownership and also controls the management of the company.

In short, foreign investment is the introduction of foreign capital in a company which is based in a different country. So, it results in the movement of capital from one country to another. It can be in the form of:

• Foreign Direct Investment: Investment from a source outside the nation, into the production or business of a company.
• Foreign Portfolio Investment: Investment by the foreign company, in the securities market of another country.
• Foreign Institutional Investment: Investment by foreign investors in the passive holdings of the company, that operates in a different country.