What is the major reason underlying trade between nations?
The fundamental reason behind international business is that countries cannot produce equally well or cheaply all that they need. This happens due to the unequal distribution of natural resources among countries or differences in their productivity levels.
The availability of various factors of production such as labour, capital, and raw materials differs among nations. Moreover, labour productivity and production costs differ due to various socio-economic, geographical, and political reasons.
As a result, each country finds it advantageous to produce those goods and services that it can produce more effectively at home, and procure the rest through trade with other countries. This is precisely why countries engage in international business.
Explanation
The textbook in section 11.1.2 clearly identifies the fundamental reason for international business. Countries cannot produce everything they need equally well or cheaply due to unequal distribution of natural resources and differences in productivity levels. The context explains that factors of production vary across nations, creating situations where some countries have advantages in producing certain goods. This makes trade mutually beneficial as countries specialise in what they can produce efficiently and import the rest.