International Trade Theories: Case of Singapore

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The report below is going to be based on the success story of a country named Singapore. Careful analysis of Singapore’s external trade operations is presented. The Economy of Singapore is a highly developed and successful capitalist mixed economy. Unlike it’s close Asian neighbors Singapore is perceived as developed country and has one of the highest standards of living in the world. According to country profile presented on International Monetary Fund, the countries economy success is highly due to it’s proper policy toward external trade. Thus, this country has been perceived as subject of interest for us to analyse in the given report devoted to countries external trade operations. Section A

In the given part the composition of countries major traded products are presented. Moving straight down to a point the import composition of major products is presented in Table 1. Singapore imports 2006Imports in $ value Imports as a share of total imports (in percentage terms) All industries238,704,171

Electrical and electronic equipment81,417,446

Mineral fuels, oils, distillation products


Boilers, machinery,nuclear reactors38,904,227

Optical, photo, medical apparatus7,391,9263
Table 1
As it can be seen from the Table 1 the major products to be imported are electrical and electronic equipment. It comprises 34% of all the imported products. This industry is followed by mineral fuels, oils, distillation products, etc. Next let’s take a look at the results for exports

Singapre exports 2006Export in $ valueExports as share of total exports All industries271,800,896

Electrical and electronic equipment105,015,978

Boilers, machinery,nuclear reactors48,714,488

Mineral fuels, oils, distillation


Organic chemicals13,879,726

Table 2
Here again we have electrical and electronic equipment being leading. Moreover, boilers, machinery, nuclear reactors were one of the major products imported as well. How can this be explained that a country imports and export in large amounts almost the same (at first sight) products? To answer this question we will elaborate more in the next section. Section B

The section below attempts to test to what extent the various theories of trade appear to explain the countries’ commodity pattern of trade. In order to do this we first examine the commodity pattern of exports, the commodity patter of imports, the commodity patter of net exports in absolute amounts and as a percentage of total trade This is presented in the table below: Singapore : exports and importsExports in valueImports in valueNet trade in valueNet trade All industries271,800,896


Electrical and electronic equipment105,015,978


Boilers, machinery,nuclear reactors48,714,488


Mineral fuels, oils, distillation



Organic chemicals13,879,726


Commodities not elsewhere specified11,563,153


Table 3
Moving on, what can be derived from the numbers we obtained? To answer this question firstly, we would like to briefly discuss several trade theories and see to what extent it might suit the case of Singapore. 1. Ricardian model. The classical economist David Ricardo in the Principles of Political Economy and Taxation (1817) stressed that the potential gains from international trade were not confined to Adam Smith’s absolute advantage . Ricardo presented the concept of comparative advantage. The essence of his argument is that international trade can benefit both countries as long as they trade the commodities in which they have comparative advantage in. Nevertheless, Ricardo assumed labor productivity the only factor of requirement. In the case of Singapore, this theory is not vastly suitable. The population of...
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