The theories of international trade have been proposed from the sixteenth century to the present while they have been adapting to the realities of each era.
These theories have become increasingly complex over the years, because they seek to respond to all the scenarios and problems that have arisen in the field of international trade.
Theories of international trade are born as a consequence of the need to understand the commercial relations between different countries and to favor the economic growth of these countries.
Through these theories, human beings have tried to understand the reasons for trade between nations, their effects and their different implications.
6 main theories of international trade
The following are the most important precepts of each:
1- Theory of mercantilism
It arose in England in the middle of the sixteenth century. One of its main precepts had to do with the need to generate more exports than imports, and the definition of gold and silver as the most important elements of a country's economic heritage.
The mercantilist theory indicated that greater exports would generate greater wealth and, therefore, greater power in a nation.
According to this theory, the generated of the exports would allow to pay for the imports and, in addition, to generate profits.
According to the mercantilist theory, greater exports should be generated than imports; therefore, the State played a key role in restricting imports.
This limitation was carried out through economic sanctions, the generation of import monopolies, among other actions.
2- Theory of absolute advantage
The theory of absolute advantage was proposed by the Scottish philosopher and economist Adam Smith , who was against the application of high taxes and state restrictions.
In 1776 he published the work" The Wealth of Nations ", By which it stipulated that nations should identify the productive area in which they had an absolute advantage, and specialize in it.
The concept of absolute advantage applies to that production that can be more efficient and of better quality.
Smith considered these to be the products to be exported, and imports could include products that could be obtained in the nation itself, provided that the importation of those products cost less than the production of those products in the country itself.
3- Theory of comparative advantage
The English economist David Ricardo published in 1817 the book" Principles of Political Economy and Taxation n", work in which it raises its economic theory.
According to Ricardo, if a country has an advantage over two products, it will have an absolute advantage over the one produced with better efficiency, and relative advantage over the one produced with less efficiency. This second product, with relative advantage, can be imported from other countries.
Comparative theory states that the value of products is linked to how much work it takes to produce them.
Like the theory of absolute advantage, it favors free trade and reciprocal trade relations between countries.
4- Theory of the proportion of factors
The main premise of this theory, proposed in the first decades of 1900 by the Swedish economists Eli Heckscher and Bertil Ohlin, has to do with the notion that each country will be more efficient in the production of those products whose raw material is abundant in its territory.
The theory of the proportion of factors establishes that a nation must export those products whose factors of production are abundant, and import those that use scarce productive factors in the country.
The Heckscher-Ohlin theory implies that trade is defined by the availability of productive factors in each country.
Some arguments to the contrary indicate that the statement is clearly related to the natural resources of a country, but when it comes to industrial resources, the application of the theory is less direct.
5- Theory of the life cycle of the product
This theory was proposed by the American economist Raymond Vernon in 1966. Vernon determines that the characteristics of export and import of a product can vary during the commercialization process.
Vernon determines 3 phases in the product cycle: introduction, maturity and standardization.
Introduction
A developed country has the possibility of generating an invention and offers it to its domestic market. Being a new product, its introduction in the market is gradual.
The production is located near the market to which it is directed, in order to be able to respond quickly to the demand and to be able to receive direct feedback from the consumers. International trade does not yet exist at this stage.
Maturity
At this point it is possible to start mass production work, because the characteristics of the product have already been tested and established according to the response given by consumers.
The production incorporates more sophisticated technical elements, which allows a larger scale production. The demand for the product can begin to be generated outside the producing country, and it begins to export to other developed countries.
It is possible that at this stage the developed country that generated the innovative product promotes the production of such product abroad, whenever it is economically convenient.
Standardization
In this phase the product has been commercialized, so its characteristics and notions of how it is produced are known by the commercial factors.
According to Vernon, at this time it is possible that the product in question is manufactured in developing countries.
Since the cost of production is lower in developing countries than in developed countries, developed countries could import the product concerned from developing countries at this stage.
6- New theory of international trade
Its main promoters were James Brander, Barbara Spencer, Avinash Dixit and Paul Krugman. This notion arose in the seventies and poses solutions to the flaws found in previous theories.
Among its precepts is the need for state intervention to solve certain problems that are generated in the commercial dynamics, such as imperfect competition that exists in the market.
They also indicate that the most widespread trade at the global level is the intraindustrial, which arises as a consequence of an economy of scales (scenario in which it occurs more at a lower cost).
References
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