International trade and economic trade theory

International division of labor and international trade theory of western economists (1)-Smith s absolute cost theory;

Smith believes that the cause of international trade lies in the absolute difference of commodity costs caused by different geographical and natural conditions. He advocates division of labor, which can improve labor productivity. It is good for everyone to specialize in producing one commodity and then exchange it. He believes that international division of labor is the highest form of various forms of division of labor. Therefore, if the products produced abroad are cheaper than those produced at home (the production cost is absolutely low), then we should export the products produced at home under favorable production conditions in exchange for foreign products instead of producing them ourselves. He believes that the basis of international division of labor is favorable natural endowment, or favorable production conditions acquired the day after tomorrow. Whether it is natural endowment or acquired favorable production conditions, a country can produce a product at an absolutely low production cost and then exchange it, which will make the most effective use of resources, labor and capital in various countries, thus greatly improving labor productivity and increasing social material wealth.

Smith's theory of international division of labor is called regional division of labor theory or absolute cost theory.

(2) Ricardo's comparative cost theory:

Ricardo developed Smith's theory, raised it to a new level and put forward the theory of comparative cost. The core of Ricardo's comparative cost theory is the principle of comparative advantage. This principle tells us that any country, regardless of its economic strength, can determine its own products with comparative advantages and arrange production and trade according to the principle of comparative advantage, so that both sides can obtain more products under the same labor consumption than before the division of labor. Ricardo's comparative cost theory is regarded as a classic of western international trade theory. Later international trade theories were supplemented or developed on the basis of Ricardo's comparative cost theory. (1) factor endowment theory;

It was first put forward by the Swedish economist Heckschel 19 198 and another Swedish economist Olin Yu.

The theory was founded in 1933, also known as Hector-Olin theory or Hector-Russia model.

Ricardo's comparative cost theory does not explain why the comparative costs of the two countries are different. Herzog-Russia inherited and developed Ricardo's comparative cost theory, and put forward the factor endowment theory, which explained the causes of international trade with the abundance and shortage of production factors.

The so-called factors of production refer to the main factors that must be possessed in production activities, or the main means (land, labor, capital, entrepreneurial talents) that must be invested or used in production. Olin believes that the absolute difference in international commodity prices is the direct cause of international trade. The so-called international absolute difference in commodity prices refers to the difference between the prices of the same commodity in different countries expressed in their own currencies and the prices expressed in the same currency. International trade occurs because of different prices. When the price difference between the two countries is greater than various transportation costs, it will bring the benefits of transporting goods from countries with lower prices to countries with higher prices, so that international trade can take place.

Why are there differences in prices between the two countries? Olin believes that the absolute difference in price is due to the absolute difference in cost, and the absolute difference in cost is mainly due to:

First, the supply of production factors is different, that is, the two countries have different factor endowments;

Second, different products use different proportions of elements in the production process.

Accordingly, a country should export goods that intensively use the most abundant factors of production in the country and import goods that intensively use the factors of production that the country lacks. According to the different types of production factors, products can be classified into labor-intensive products, capital-intensive products and technology-intensive products.

(2) The Mystery of Leontief

After the war, Leontief, an American economist, verified the import and export commodity structure of the United States by using the input-output analysis method he founded according to the trade theory with Russia. As a result, he came to a conclusion completely contrary to the theory between Russia and Russia, which caused a sensation in the west and was called "Leontief's anti-theory".

According to Russian theory, the United States should export capital-intensive products and import labor-intensive products. However, the actual verification results are just the opposite. American exports are labor-intensive products, while imports are capital-intensive products. Who is wrong? It seems that there is nothing wrong with either. This has become a mystery. In order to solve this "mystery", western economists have conducted extensive research on it and put forward various explanations, thus promoting the development of post-war international trade theory.

(3) the explanation of "the riddle of Leontief"

Leontief's own explanation. There are not only quantitative differences, but also qualitative differences in the endowment of production factors in different countries. The "mystery" arises because the efficiency of American workers is higher than that of other countries, about three times that of other countries. The main reason is that the management level of American enterprises is higher, the education and training of workers are better, and people are more enterprising.

Theory of human skills. Based on the heterogeneity of labor, it is considered that the production and trade of primary products mainly depend on the endowment of natural resources, while the production and trade of industrial products mainly depend on the endowment of skilled labor and human skills. The labor proficiency or skill level of different countries determines their different positions in the production and satisfaction of industrial products. This is mainly because the international competitiveness of industrial products depends on the quality and price of products, which are closely related to the input of skilled labor. The proficiency of labor and the level of human skills are improved with the slow improvement of the level of economic development and education development, which requires a long-term process, which makes countries with relatively rich skilled labor force in the production and trade of industrial products in a leading position for a long time.

Human capital theory. Theoretically speaking, skilled labor or human skills are also a kind of capital, which is called human capital. Skilled labor force is the result of investment, education and training of talents. Like material capital, it can get repeated benefits. Endowment theory holds that the greater the difference of factor endowments among countries, the more trade opportunities and the greater the trade volume. Therefore, the exchange of manufactured goods between developed countries and primary products of developing countries should be the main part of international trade. But this is not the case. After the war, the exports of developed countries accounted for about 3/4 of the world trade volume, of which 3/4 were exported to developed countries. More than half of international trade is industrial trade between developed countries, while trade between developed countries and developing countries or countries with better industrial products accounts for less than 1/5 of world trade. This endowment theory cannot be explained. Therefore, after the war, some economists had to put forward some new international trade theories in order to explain this new phenomenon theoretically.

(1) demand similarity theory

This theory analyzes the flow of international trade from the perspective of demand. With special emphasis on the role of domestic demand. The more similar the demand structure between the two countries, the greater the trade volume between the two countries. But what factors affect a country's demand structure? Theoretically speaking, the per capita income level is the most important factor affecting a country's demand structure. It can be said that the trade scope between countries with the same per capita income level may be the largest, and the difference in per capita income level is a potential trade obstacle. Use this theory to strengthen the reason why the trade between developed countries accounts for the largest proportion of international trade after the war.

(2) product life cycle theory

The production of products also goes through three stages: new products, mature products and standard products. First of all, countries that develop new products have advanced technology and high income levels, and begin to produce and export such products and move towards the international market. The gap in technological innovation is the cause of trade.

In the mature stage, with the popularization of production technology, the market demand continues to expand, and the production and sales volume increase sharply, which requires a lot of capital investment. At the same time, many countries produce and export products, forming a situation of mutual export. At this time, the technological gap in capital-intensive production has become the cause of trade.

In the standard product stage, the product has become a general product without a lot of capital and technology and a labor-intensive product. At this time, developing countries have more comparative advantages, and the wage gap of unskilled labor becomes the cause of trade. Product life cycle theory emphasizes the important role of technology in international division of labor and regards technology as an important factor of production.

(3) intra-industry trade theory

It refers to the simultaneous export and import of a product from the same industrial sector in more than two countries. This occupies a large proportion in contemporary international trade and has an important position. The main points of this theory are:

Product difference is the basis of international trade.

Differentiated products can be divided into vertical products and horizontal products.

The trade scale and price of differentiated products depend on supply and demand factors. The factors that determine demand are consumers' income level and hobbies, in which the difference of income level causes the demand change of vertical products and the difference of hobbies causes the demand change of horizontal products. The factors that determine supply are economies of scale and monopoly profits of manufacturers.

The trade of the same product is caused by the different costs of transportation, storage, sales and packaging.

Intra-industry trade theory is a new international trade theory that emerged in 1970s, which explains the reasons and scale of trade between the same industrial sectors.