write 3 problem faced in exchanged of goods.
Answers
The following are the special problems or difficulties of foreign trade:
1. Distance:
Usually foreign trade involves long distances. Distance between various countries is a great difficulty in a foreign trade. Due to long distances it becomes difficult to establish close relationship between the buyer and the sellers.
2. Diversity of Languages:
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Different languages are spoken and written in different countries of the world. The difference of language creates another problem in the foreign trade. It becomes difficult to understand the language of traders in other countries. All correspondence has to be done in foreign language.
3. Transport and Communication:
Long distances in foreign trade create difficulties of proper and quick transport and communication. Both of these involve considerable delay as well as cost. The high cost of transport is a great hindrance in foreign trade.
4. Risk and Uncertainty:
Foreign trade is subject to greater risk and uncertainties as compared to home trade. As the goods have to be transported to long distance they are exposed to many risks. Goods in transit overseas are susceptible to the perils of the sea. These risks may be covered through marine insurance but this involves extra cost in foreign trade transactions.
5. Lack of information about foreign traders:
In foreign trade since there is no direct and close relationship between the buyers and the sellers, the seller has to take special steps to verify the credit worthiness of the buyer. It is difficult to obtain information regarding credit worthiness, business standing and financial position of persons living .