EducationPakistan Studies

Significance of Trade and Commerce Activities

This article discusses the significance of trade and commerce activities for a nation.

What are trade and commerce?

The term trade refers to the exchange of goods and services whereas the term commerce refers to a set of factors that make trade happen.  These factors include transportation, publicity, and the government’s trade policies. 

What is the significance of trade and commerce?

The significance of trade and commerce activities for a nation are as follows: 

1. Fulfilling the needs of people around the world

Trade helps people meet different needs of goods and services at the domestic and international levels. No person or country is self-sufficient in the manufacture of goods and services that they need in their daily life. They need to exchange goods and services to fulfill their needs which we call trade.

2. Employment opportunities

Trade and commerce activities create job opportunities for the people of a country. Commerce includes publicity, Transportation, and Govt. regulation. If we talk about publicity it refers to the advertisement. TV channels, both print, and electronic media are part of commerce as they help publicize industrial products. News channels and newspapers etc running on advertisements give jobs to millions of people around the world. Similarly, thousands of people are related to the transportation sector which is related to the transport of finished goods to market and raw material to the market.

3. Specialization of production

Different countries are endowed with different natural resources by the nature. By making use of these resources these countries have specialized in manufacturing unique and great quality particular products. For example, Pakistan is famous for its textile products. Bangladesh for jute-based garments, Sri Lanka for tea.

Similarly, some countries also specialize in the manufacture of products and export them to all over countries. For example, Japan is famous for electronics. Switzerland for the manufacture of wristwatches. Pakistan is famous for sports goods and surgical instruments.

Specialization of goods enables a country to export goods to other countries and earn much-needed foreign exchange. 

4. Transfer of Technology to the poor states 

Trade allows the transfer of technology and managerial skills from the developed world to underdeveloped or developing countries. For example, Pakistan does not manufacture technological devices like laptops, computers, mobile phones, etc. They are imported from other countries to keep the economy up to date and meet increasing needs in this technology-driven time.

When an organization introduces some new technology it needs the relevant skilled people to handle it. The company trains people for handling the technology. This is the underdeveloped or developing countries get new technology and managerial skills. 

5. Promotion of industrialization

Every nation tries its best to narrow the trade gap and increase its foreign exchange earnings.  Foreign exchange earnings could only be increased with an increase in volume and quality of exports. To increase foreign exchange earnings depends upon the production and export of quality products of variety. This paves way for the establishment of more and more industries in a country. 

6. Achievement of Economies of scale

The term ‘economies of scale’ refers to a condition in which people have access to cheap and quality products and services because of excess production.

As trade stimulates industrialization, the scale of production will plummet making all finished goods and services affordable and accessible at the local level. This will consequently lead to an increase in the living standard of the people. 

7. Increase in National income

Today powerful countries are those countries that are economically strong.  The secret behind economically strong nations like China, the USA, etc. is their trade with the world. These countries are industrially developed. They sell their products all over the world to earn income.

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