According to Hill, globalization refers to the shift toward a more integrated and interdependent world economy (2009). Globalization has several facets, including the globalization of markets and the globalization of production. Globalization of markets is to the merging of historically distinct and separate national markets into one huge global marketplace. Globalization of production is to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as labor, energy, land, and capital) (Hill, 2009). There are several traditional international trade theories that would support the concept of globalization. The first theory is free trade that refers to a situation in which a government does not attempt to influence through quotas or duties what its citizens can buy from another country or what they can produce and sell to another country. Another theory is mercantilism, which is an economic philosophy advocating that countries should simultaneously encourage exports and discourage imports. The final theory is the theories of Smith, Ricardo, and Heckscher-Ohlin. Smith, Ricardo, and Heckscher-Ohlin show why it is beneficial for a country to engage in international trade even for products it can produce for itself. According to Adam Smith, “countries should specialize in the production of goods for which they have an absolute advantage and then trade these good for the goods produced by other countries” (2009). Heckscher-Ohlin theory predicts that countries will export goods that make intensive use of those factors that are locally abundant; while importing goods that make intensive use of factors that are locally scare (2009). Finally, Ricardo’s theory suggest that countries should specialize in the production of those goods they produce most efficiently and buy goods that they...
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