International Trade: Exchange of Goods and Services across Borders

Topics: International trade, Comparative advantage, Economics Pages: 6 (2269 words) Published: January 14, 2013
International trade could be define as the exchange of goods and services across the borders, it means that contrary to domestic trade, it includes the business with others countries and in this way, the play a role if they want to grow. Actually, the situation is more complex and plenty of theories have shown that international trade is not only conduct by the availability of resources owned by a location but even a country with a small quantity of assets could be competitive on the market. In a first part, we will demonstrate that the availability of resources is the condition of the competitiveness before showing in a second time that others factors have to be take into consideration. We will finish by a synthesis of the situation in order development of exports and imports. Each country in the world participates to the trade in function of its production, which is determinate by the resources available on the area. A resource could be a natural resource a human resource or a resource in term of process which competitiveness and the economic value of their areas. That is to say that as they have the resources, they have the control of the situation in To begin, the mercantilism introduced the idea of international trade by expressing the orientation that every nation should take in term of business. The fact is that a nation has to reduce its dependence on imports in order to keep the control on its proper allocation in goods. Nigel Grimwade (2000, pp.30) explains that in this way; a country should produce as more as it is possible relterm of trade and they can fix their conditions in order to be competitive as much as it is possible. However, if international business was only resume by this fact, it would say that except industrialized countries, no one country could be participate to the exchange of goods at a world level while countries in development have to to express a compromise between the two parts of the main statement.

atively to its resources in the aim to not become dependent from others. Thus, the strategy could only be oriented on the export that is the illustration of a situation of domination. Indeed, the theory of the mercantilists explained that the most competitive nation is those which can assume its needs withoutof good. Indeed, according to Smith’s view, if country has an absolute advantage in the production of a certain good, in order to reduce the cost of production, the main way is to adjust the production in favour of this type of product depend of the trade with others country. This first explanation excluded trade as a way to create competitiveness for a nation and indicated that only present resources on a particular area could give an advantage for this one and engender the competitiveness.

Following the mercantilism’s point of view, an economist named Adam Smith argued the principle of the absolute advantage for a nation. The difference in this case is the role played by the international trade, which permit, to a nation with a certain advantage to be in a profitable situation. Riad A.AJacountries that adapt this principle. However, there is a condition which is to have a certain advantage in producing one good and that is why countries without particular assets could not participate to the exchange and so, increase their competitiveness. In the current world trade, it would means that African countries could not participate to the business and only have an observant role of industrialized countries mi (2006, pp48) reports Adam Smith’s observation following the fact that all nations could beneficiate of the trade if they decide to specialise in the production of one type . The classical example is two countries, which are producing clothes and wheat. Each country should specialise its production on the good for which they are more efficient. Then, they can increase the productivity for one good and obtain the other by trading with the other nation. The benefit is split between...
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