Foreign Trade vs. Foreign Investment

Difference Between Foreign Trade and Foreign Investment is that Foreign trade involves buying and selling of products and services between the two nation of the world, and Foreign Investment is an investment in a specific business from foreign companies.

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Foreign Trade vs. Foreign Investment

Both foreign trade and foreign investment brings capital to the nation which triggers the nation’s development. In this article, we will understand the difference between foreign trade and foreign investment.

Comparison Chart

BASISFOREIGN TRADEFOREIGN INVESTMENT
MeaningForeign trade suggests the trade of goods, capital, and services in global markets.Foreign investment is an investment that is made in business from a source outside the nation.
Want Resource endowmentCapital requirement
ResultIntegration of markets of different countries.Investment in the kind of Capital, technology, and other sources.
Edge It creates an opportunity for manufacturers to cover the global markets.It attracts long-term capital to the organization.
Goal to bring in profit and excel global industry.To create returns in the long term.
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What is Foreign Trade?

Foreign trade could be understood in the markets as the action of trading services and products. It facilitates access to products in the country’s market, from where it’s produced differently. As the costs of the goods that are similar are equivalent it results in the gain of choice of products. The manufacturers compete with each other.

Foreign trade is required to satisfy its resource requirements, which means that the trade between the two countries takes place because no nation is self-sufficient. To meet its requirement of resources that are human-made or natural out, it participates in the trade with the country, which owns these tools in abundance. The countries which are rich in other things or minerals find it beneficial to export it.

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Foreign trade is subject to trade policy that is in controlling imports and the exports of the country, the management measures and the directive principles, that helps.

What is Foreign Investment?

Foreign investment suggests investment made by foreign nationals or foreign corporates in percentage in the business, in that they maintain ownership and controls the management of the firm.

In summary, foreign investment is the introduction of foreign capital in a business that’s based in a different country. It results from one country to another from the movement of funds.

Key Differences between Foreign Trade and Foreign Investment

  1. Exchange of products and services across the national boundaries of the nation is known as foreign trade. While, Foreign investment is a sort of investment that a company or a person from a country makes, in the equity of the firm.
  2. Every country doesn’t have all of the resources, and that’s the reason why, foreign trade is required, to fulfill the requirement for those resources that are deficient in a nation. On the other hand, foreign investment proceeds to satisfy the company’s capital
  3. Foreign trade joins the markets of various countries of the world. In contrast, foreign investment brings
  4. Foreign trade makes a fantastic chance for domestic manufacturers to capture international markets and increase their overall reach. As against, foreign investment tends to attract capital in the business and that also in foreign currency.
  5. The principal objective of foreign trade is to make a profit and create an impression in the worldwide market. Unlike, a foreign investment that is made to create returns and has an ownership stake in the business based in a different nation.

Conclusion

Both foreign trade and foreign investment results in the rise in the country’s Gross Domestic Product (GDP), which becomes a significant source of the market’s development. In conclusion, foreign trade involves buying and selling of products and services; in global markets, foreign investment is all about cash spent for the long term by foreign companies.

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Video Explanation

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