International Trade Theories

International trade theory is a sub-field of economics which analyzes the patterns of international trade, its origins, and its welfare implications. International trade is the exchange between two folks or entities in two different countries. International trade theories are completely different type of theories that give explanation on international trade. There are several international trade theories like: mercantilism; absolute advantage; comparative advantage; Heckscher-Ohlin theory; product life cycle theory. Mercantilism projected that a rustic ought to try and export over it imports, so as to receive gold. The most criticism of mercantilism is that countries area unit restricted from import, a hindrance of international trade. Economist developed the idea of absolute advantage that stressed that a rustic ought to turn out merchandise or services if it uses a lesser quantity of resources than different countries. Ricardo explicit in his theory of comparative advantage that a rustic ought to concentrate on manufacturing and commercialism product within which it’s a comparative advantage and it ought to import merchandise within which it’s a comparative disadvantage. Hecksher-Ohlin’s theory of issue endowments stressed that a rustic ought to turn out and export merchandise that need resources that area unit overabundant within the home country. Economic expert tested the Hecksher-Ohlin theory within the U.S. and located that it absolutely was not applicable within the U.S. Raymond Vernon’s product life cycle theory stresses that a corporation can begin to export its product and later war foreign direct investment because the product moves through its life cycle. Eventually a country’s export becomes its import.

Hi Jacob. International trade theories are simply different theories to explain international trade. Trade is the concept of exchanging goods and services between two people or entities. International trade is then the concept of this exchange between people or entities in two different countries.