Similarities and differences between traditional international trade theory and new international trade theory

Traditional international trade theories mainly include theory of absolute advantage, comparative advantage theory and H-O-S model.

Ricardo's theory of comparative advantage holds that countries engage in specialized production that is conducive to improving commodity exchange conditions, and their income and welfare can be improved through international exchange. The theory of comparative advantage mainly emphasizes that countries have different functional characteristics in demand and supply. The division of labor between countries, that is, specialized production, can develop different technologies. Therefore, even with the same labor force, the production functions of different countries are different, so that the economies between countries will be divided and perform their duties.

The H-O-S (Eli Heckscher-Bertil Ohin-Paul Semuelson) model is a model of two countries, two commodities and two resource endowments. The main premise assumptions are as follows:

1) The production factors are homogeneous, or the technical level of production is the same, so the production function of products is the same. 2) The scale reward of production remains unchanged. 3) It conforms to the premise assumption of the perfectly competitive market model. 4) Make full use of production factors. 5) The factors of production are different in different countries, so the factor intensity of commodities is different, which is generally labor-intensive and capital-intensive.

The main conclusion of H-O-S theory is that a country mainly exports products produced by its relatively abundant and cheap production factors, while importing products produced by its relatively scarce production factors.

However, as early as 1953, Leontief, an American economist, found that the capital/labor ratio of American imported products was >: the capital/labor ratio of American exported products. That is to say, as a developed country with rich capital, the United States exports labor-intensive products and imports capital-intensive products, which is inconsistent with H-O-S's theoretical prediction and is called "Leontief's mystery". Leontief's discovery completely overthrew the empirical basis of traditional international trade theory.

It is for these reasons that a new international trade theory appeared in the early 1980s, which surpassed the traditional international trade models such as H-O-S model which emphasized endowment.

Among them, the famous theories are: the knowledge capital theory put forward by Romer, the author of Advanced Macroeconomic Theory, and the human capital theory put forward by Lucas. Economist stouch (1988) also put forward the view that the technology-stagnant departments that can't actively learn new technologies and new management methods will lead to the national economy falling into a "non-growth trap".

Considering the complex factors such as intra-industry trade, FDI and multinational companies, patent licensing, technology and population quality of developing and developed countries, the new international trade theory introduces new variables such as human capital, technological progress, internal and external effects of scale, imperfect competition and transnational capital. The new theory has changed from the static economic analysis of the traditional international trade theory to the dynamic economic analysis. Emphasize the role of strategic international trade policy.

Traditional national trade theory holds that international free competition is the source of national economic development. The mainstream is relying on this traditional theory to constantly advocate the importance of trade liberalization to national economic growth, and the word we often hear-"win-win" is the embodiment of this concept.

The new international trade theory introduces endogenous economic theory and draws the conclusion that imperfect competition is the real source of national competitive advantage. According to the new international trade theory, international trade increases capital rent or investment return, and the differentiation of capital accumulation becomes more and more serious in the long run. Rich countries that export capital-intensive products will become richer and richer, while countries that import capital-intensive products will become poor from rich. A typical example of this situation is the historical evolution between North America and South America.