Please describe in English what are the theories of international trade?

Theories of international trade try to explain why there is international trade and how it should be treated as a country.

Table of Contents

1 Overview

2 Classical School

Mercantilism

Agrarianism

Absolute Advantage

Comparative Advantage

Protected Trade

Mutual Demand

3 Neo-classical School

Factor Endowment

Leontief

4 Holoclassical School

5 Emergent School

6 Contemporary changes

7 Writings

8 Self-examination in International Trade

Professional Overview

Training Objectives

1 Overview Editorial

The development of international trade theories has roughly gone through four major stages: classical, neoclassical, neotrade theories, and the emergent classical theory of international trade.

Classical and neoclassical international trade theories are premised on assumptions such as perfectly competitive markets, emphasize the mutual benefits of trade, and mainly explain inter-industry trade.

After World War II, with the new dynamics of global trade, new trade theories emerged, explaining new trade phenomena from the perspectives of imperfect competition, economies of scale, and technological progress.

The emerging classical international trade theory, on the other hand, explains trade in terms of the division of labor by specialization, and seeks to unify the traditional trade theory and the new trade theory within the framework of the emerging classical trade theory.

2Classical Editors

Classical international trade theory arose in the mid-18th century and was developed on the basis of a critique of mercantilism, which mainly included Adam Smith's theory of absolute advantage and David Ricardo's theory of comparative advantage. Classical trade theory explains the reasons for the emergence of international trade, its structure, and the distribution of its benefits from the point of view of labor productivity.

Mercantilism

During the period of primitive capitalist accumulation in the late 15th and early 16th centuries, the mercantilist (Mercantilism) view of international trade, also known as the trade balance theory (Late Mercantilism), which centers on the pursuit of trade surpluses, was represented by Thomas Mun of Britain. Mercantilism believes that the only form of wealth is gold and silver, the amount of gold and silver is the only measure of a country's affluence, and the main channel to obtain gold and silver is international trade. By seeking a surplus through rewarding exports and limiting imports so that gold and silver would flow in, the country would become wealthy.

Physiocratic school

In the second half of the 17th century, in France, the idea of opposing mercantilism and advocating economic freedom and attaching importance to agriculture emerged, forming the physiocratic school, whose founder was F. Quesnay.

The core idea of the physiocratic school was to advocate a free economy, including free trade, and they believed that the "natural order" (including free trade) was an important mechanism for ensuring market equilibrium and price stability.

Absolute Advantage

The mercantilist view of trade was challenged by the classical school of economics at the end of the 18th century, when Adam Smith proposed a theory of absolute advantage in international trade based on the theory of the division of labor in production.

In The Nature and Causes of National Wealth (Wealth of Nations), Smith pointed out that the basis of international trade lies in the existence of absolute differences in labor productivity and cost of production among commodities of various countries, and that such differences arise from natural endowments and acquired conditions of production.

Adam Smith believed that in the international division of labor, each country should specialize in the production of its own products with absolute advantages, and use part of them to exchange its products with absolute disadvantages, which will make the most efficient use of resources in each country, and better promote the division of labor and exchange, so that each country to obtain the maximum benefit.

Comparative Advantage

Given the limitations of the theory of absolute advantage, David Ricardo inherited and developed Smith's theory in Principles of Political Economy and Taxation.

Ricardo believes that the basis of the division of labor in international trade is not limited to absolute cost differences, even if a country in the production of all products labor productivity is in a position of total advantage or total disadvantage, as long as the degree of advantage or disadvantage is different, the country can participate in international trade through the production of labor productivity differences in the product of smaller, so as to obtain comparative advantage.

The theory of comparative advantage follows the principle of "taking the greater of the two advantages and the lesser of the two disadvantages", and believes that the relative differences in the level of technology between countries produce differences in comparative costs, which constitutes the cause of international trade and determines the pattern of international trade.

Protection of trade

In 1841, the German economist Friedrich List put forward the theory of trade protection policy based on nationalism in the National System of Political Economy, pointing out that the protection system should be compatible with the degree of development of national industry, also known as the theory of protection of infant industry.

Unlike mercantilism, he combined trade and national economic development from the height of protection of productive forces, forming a theory of trade protection based on statism, and more objective and practical in the implementation of trade protection policy.

Mutual Demand

Ricardo's theory of comparative advantage only argues for the basis of mutually beneficial trade and where the benefits lie on the premise of specialized production in each country, and does not explain how the total trade benefits are distributed between the two sides of trade.

John Stuart Mill, in his Principles of Political Economy, identified the problem of prices in the international exchange of commodities from the point of view of mutual demand in order to explain how the benefits of trade between two countries are distributed.

The theory of mutual demand essentially refers to the theory that the value of commodities is determined by supply and demand, and is a refinement and supplement to the theory of comparative advantage.

The theory uses the upper and lower limits of the proportion of goods exchanged between the two countries to explain the scope of profitability of both sides; uses the terms of trade to explain the proportion of each side in the distribution of benefits; and uses the intensity of mutual demand to explain the changes in the terms of trade.

3Neoclassical Editors

In the late 19th and early 20th centuries, neoclassical economics gradually took shape, and the neoclassical trade theory, which analyzes international trade within the framework of neoclassical economics, emerged.

Factor endowment

In 1919, the Swedish economist Eil F Heckscher (Eil F Heckscher) put forward the basic view of the theory of factor endowment, pointing out that the differences in comparative advantage to produce the two conditions necessary.

In the 1930s, this argument was enriched by his student Beltil G Ohlin (Beltil G Ohlin), whose masterpiece Interregional Trade and International Trade further developed the theory of factor endowment, and thus this theory is also known as the H-O theory.

Unlike the classical trade model of single factor inputs, the H-O model takes comparative advantage as the basis of trade and has been developed, analyzes the production costs of products under the framework of two or more factors of production, and explores the interaction between international trade and factor changes in a general equilibrium approach.

The core of the model is that, under the premise of equal technological level of the two countries, there are two reasons for the difference in comparative costs: one is the difference in factor abundance between the two countries; and the other is the difference in factor intensity of commodity production.

Countries should concentrate on producing and exporting products that fully utilize their factor abundance in exchange for products that intensively use their scarce factors. Such a pattern of trade results in improved welfare for all participating countries.

In the 1940s, Paul Samuelson (Palua A Samuelson) mathematically deduced the H-O model, pointing out that the effect of international trade on the income disparity between countries will inevitably equalize the relative and absolute prices of factors of production between different countries, which is also known as the Equalization Theorem of Factors of Production Prices or H-O-S Theorem (Heckscher -Ohlin-Samuelson model).

This theorem potentially holds that the efficient allocation of production and resources worldwide can be achieved through free trade in commodities alone, in the absence of cross-border movement of factors.

There are two other fundamental theorems related to this theory.

The long-run effect of international trade on the returns to the factors of production in the country is summarized by the Stolper-Samuelson theorem as follows: the payoffs of the factors intensively used in the production of exported goods (the factors of national abundance) are increased; the payoffs of the factors intensively used in the production of imported goods (the factors of national scarcity) are decreased; irrespective of the industry in which these factors are used.

Robzinski's theorem asserts that in a two-commodity world, if relative prices are fixed, an increase in one factor of production reduces the output of the other commodity. It suggests that changes in factor endowments determine changes in resource allocation.

Both of these theorems provide important extensions of the H-O theory.

Leontief

According to the H-O theory, the U.S. is a country with an abundance of capital and a relative scarcity of labor, and its foreign trade structure should be one in which it exports capital- and technology-intensive products and imports labor-intensive products.

In the early 1950s, the U.S.-based Soviet economist Leontief (Leontief) according to the H-O theory, with the U.S. in 1947, 200 industry statistics on its import and export trade structure for verification, the results have come to the opposite conclusion with the H-O theory, this problem is called Leontief paradox.

The Leontief paradox did not form a systematic theoretical point of view, but it put forward a serious challenge to the original international division of labor and trade theory, triggering a reflection on the mainstream of international trade thinking, and promoting the birth of a new international trade theory after World War II.

4 All-New Pie Edit

After World War II, a series of new changes in the product structure and geographic structure of international trade have occurred.

Trade between similar products and between developed industrial countries has greatly increased, industrial leadership has continued to shift, and the internalization of multinational corporations and the rise of outward foreign direct investment have contradicted the classical theory of comparative advantage, which held that trade would only take place between countries with different labor productivity or resource endowments.

Both classical and neoclassical international trade theories assume that product markets are perfectly competitive, which also does not coincide with the reality of contemporary international trade, and in such an international environment, the new trade theory came into being.

New Factor Theory

New Factor Theory gives a richer connotation to the factors of production other than land, labor and capital, arguing that it also includes new types of factors of production, such as natural resources, technology, human capital, research and development, information, management, etc., and explains the basis of international trade and the changes in the pattern of trade from the point of view of new factors.

1, the theory of natural resources

In 1959, the United States scholar J. Vanek (Vanek) put forward to the scarcity of natural resources to explain the Leontief paradox, that the United States imports of natural resources development or refining is a large amount of capital consumption, which will make the import substitution of capital-intensive products in the rise. Deducting the effect of resources, U.S. imports of capital-intensive products would then be smaller than their exports.

2. Human Capital Theory

Human Capital Theory, represented by D. B. Keesing, P. B. Kenen, and T. W. Schultz, further extended the H-O theory by introducing human capital as a new factor of production.

Through the investment in labor force, to improve its quality and skills, and then enhance labor productivity.

Countries with abundant human capital tend to export products that are intensive in human capital or human skill factors in terms of trade structure and flow.

3, research and development doctrine

Gruber (W. Gruber), Vernon (R. Vernon) that research and development is also a factor of production, the international competitiveness of a country's exports and the product of the research and development of the factor intensity of the existence of a high positive correlation.

The size of each country's research and development capacity can change its comparative advantage in the international division of labor, and thus change the pattern of international trade.

4, the information factor

Although information is an intangible resource, it can create value. Modern information technology has an increasingly strong impact on production, the utilization of information will affect a country's comparative advantage, thus changing a country's international division of labor and international trade status.

Preference Similarity Theory

In 1961, S. B. Linder put forward the Preference Similarity Theory in his book "On Trade and Transformation", and for the first time, he searched for the causes of trade from the demand side.

He argued that the factor endowment doctrine was only applicable to explain trade in primary products, and that two-way trade in industrial goods occurred as a result of overlapping demands.

The basic ideas of the similarity of preferences theory are:

The likelihood of exporting a product is determined by its domestic demand; the direction and flow of trade between two countries depends on the extent to which the demand preferences of the two countries are similar, and the more similar the structure of demand is, the greater will be the volume of trade; the average level of income is the most important factor affecting the structure of demand.

Dynamic trade theory

Dynamic trade theory mainly analyzes the reasons for the emergence and development of international trade from a dynamic perspective.

1, technology gap theory

Technology gap theory, also known as the theory of innovation and imitation, M. V. Posner (Michael V. Posner) and G. G. Hufbauer (G. G. Hufbauer) will be technology as an independent factor of production, focusing on the analysis of international division of labor from the point of view of technological progress, innovation, diffusion, and expanding the scope of factors in the theory of resource endowment. The scope of factors in the theory of resource endowment has been expanded.

The technology gap refers to a dynamic trade pattern formed by a country's technological innovation and control of technological outflow, which will have an impact on the ratio of factor endowment of each country, thus affecting the change of trade pattern.

2, product life cycle theory

Raymond Vernon (Raymond Vernon) will be marketing in the product life cycle theory and technological progress combined to explain the formation and development of international trade. 1966 he pointed out in the product cycle of international investment and international trade article, the United States enterprise foreign direct investment and product life cycle There is a close relationship.

The national transfer theory of product production, assuming that the transfer of information between countries is subject to certain restrictions, the production function is variable, and the consumption structure of countries is different, pointing out that the product in its different stages of the life cycle of the factors of production needs are different, and the different countries have the factor of production of the degree of abundance of the country's product production stage and export status.

The product life cycle theory dynamizes the comparative advantage theory and the resource endowment theory, which well explains the phenomenon that some countries have changed from exporters to importers of certain products in the post-war period.

3, "technological spillover" and "learning by doing" doctrine

This point of view will be technology as an endogenous variable, Romer put forward "learning by doing" type of technological progress, mostly from technological spillover. Much of the technological progress that Romer suggests has come from technological spillovers, i.e., the natural importation of technology from trade or other economic behavior.

The Krugman (Krugman) argued that if the importing country will use the technology of the spillover country for the comparative advantage industries, it will be favorable to both countries; on the contrary, it will be unfavorable to both countries.

Assuming that the rate of domestic technology spillover is higher than that of international technology spillover, the country's original leading industries may accelerate their development, and the original comparative advantage will be enhanced. The spread of technology makes the differences between countries expand, emphasizing the dynamic impact of technological change on international trade.

4. Dynamic Comparative Advantage Theory

Lin Yifu and others proposed that a country's industrial and technological structure depends fundamentally on domestic factor endowment, and its upgrading is the basis for upgrading industrial structure.

Changes in the capital stock have the greatest impact on a country's factor endowments.

The increase in the capital stock comes from accumulation, which depends on the propensity to save and the size of the economic surplus.

The institutionally determined propensity to save is fixed, and thus the key influence on the capital stock is the size of the economic surplus.

If a country's industrial and technological structure is able to fully utilize the advantages of its resource endowment, its production costs will be lower and its ability to compete will be stronger, which in turn will create more economic surplus and the larger the accumulation will be.

Therefore, the upgrading of the resource structure can be realized faster through the exertion of comparative advantages, thus accelerating the upgrading of the industrial structure.

The theory of intra-industry trade

The theory of intra-industry trade, also known as the theory of differentiated products, takes imperfectly competitive markets and economies of scale as the premise, and considers the demand situation from a dynamic perspective, which is more in line with reality. Due to the increasing scale of intra-industry trade, many economists have been building models to explore this issue from different perspectives since the 1980s.

1, the new Chamberlain model

In the development of intra-industry trade theory, Krugman (Krugman) model has a pioneering role, he will be Dixit (Dixit) and Stiglitz (Stiglitz) proposed by the difference between the product and the internal economies of scale taken into account in the monopoly competition model to the open conditions, the creation of the "New Chamberlain Model".

The model proves that when the market structure changes from perfect competition to imperfect competition and reaches the stage of increasing returns to scale, even if there are no technological and factor endowment differences between the two countries, product level differentiation and economies of scale can promote international trade and increase the welfare of both countries.

2. Lancaster model

This intra-industry trade model based on simple horizontal product differentiation explains trade between the two countries on the basis of the only dominant selectivity in product characteristics and consumer preferences.

Lancaster (Lancaster) argues that the intra-industry division of labor and trade between two economies with the same characteristics can still take place under the influence of maximizing returns to scale and differences in consumer preferences if there are no trade barriers and transportation costs.

3, the new Heckscher-Ohlin model

The new Heckscher-Ohlin model is based on vertical product differences, Falvey (Falvey) and others through the adjustment of the H-O model assumptions of the premise of the product differences and the different combinations of factors, such as labor and capital, to establish a link between the different combinations of labor and capital, but still use the Factor endowments to predict trade, and therefore also known as the "new factor proportionality doctrine".

This theory suggests that countries with relatively abundant capital export capital-intensive, high-quality varieties of the same product, while countries with relatively abundant labor export labor-intensive, low-quality varieties, and that the resulting intra-industry trade is essentially a result of the vertical division of labor, which explains both inter-industry and intra-industry trade patterns with minimal deviation from traditional trade theory.

4, Brand - Krugman model

In order to explain the phenomenon of intra-industry trade in standardized products, Brander (Brander) and Krugman constructed a "mutual dumping model" (differential monopoly model).

The model points out that countries trade only because of the monopoly or oligopoly enterprise marketing strategy, the structure of international trade is not subject to the limitations of factor endowment, product cost differences, and the pursuit of differentiated products by producers and consumers.

This model suggests that trade is a way of expanding competition, that imperfectly competitive firms can expand their sales by dumping into the domestic market of another country through trade, and that even if there are transportation costs, there will be two-way trade, and that the volume of trade will be determined by expected differences in the elasticity of demand between the two countries.

This provides a way to explain the behavior of two countries dumping on each other.

5. Vertical Difference Intra-Industry Trade Model

Unlike the new H-O model, the Vertical Difference Intra-Industry Trade Model is premised on the oligopoly market assumption. According to Fulvie's research, an industry consists of a "product chain" of vertically differentiated products arranged in order of quality.

The F-K model developed by Falvey and H. Kierzkowski suggests that there are many types of transitions between full vertical intra-industry trade and the complete absence of such trade, and that the extent and character of vertical intra-industry trade depends on the relative impact of factor endowments, technology, and income distribution on different countries.

The Fee-Her model developed by Flamand and Helpman

presents an alternative view. Assume that there are two countries both producing a certain product, with different production efficiencies, and that labor is the only factor of production. The international division of labor in the form of product differentiation, one country has a comparative advantage in the production of high-quality

products, the other country, on the contrary, to determine the quality of the product is the labor inputs, in this case refers to "human capital". Intra-industry trade can occur if the production and consumption structures of the two countries do not match.

National Competitive Advantage Theory

Harvard professor Michael E. Porter put forward this theory, from the enterprise to participate in the international competition of this micro point of view to explain the international trade, make up for the theory of comparative advantage in the discussion of the relevant issues in the shortcomings.

Porter believes that the competitive advantage of a country is the competitive advantage of enterprises and industries, and the fundamental reason for the rise and fall of a country is whether it can achieve competitive advantage in the international market.

And the formation of competitive advantage depends on the dominant industry has the advantage, the key lies in the ability to improve labor productivity, and its source is whether the country has the appropriate innovation mechanism and adequate innovation capacity.

Porter put forward the "national competitive advantage of the four basic factors, two auxiliary factors model", factors of production, demand conditions, related industries and support industries, corporate strategy, structure and competitors, government, opportunity are the determinants of national competitive advantage.

Porter established a diamond model based on the above factors, which explains how each factor promotes or hinders the formation of a country's competitive advantage.

From the point of view of development stages, the development of a country's advantageous industries can be divided into four different stages, namely, factor-driven stage, investment-driven stage, innovation-driven stage, and wealth-driven stage.

The theory theoretically summarizes the economic and trade pattern of today's world.

5 Emergentist Edit

Emergent classical economics is

an emerging school of economics since the 1980s. Relying on the new framework of emerging classical economics, emerging classical trade theory attributes the cause of trade to the result of the interplay of the dilemma conflict between the specialization economy and transaction costs brought about by the division of labor

and thus gives a new explanatory idea of the cause of trade, which brings the core of trade theory back to the increasing returns to scale caused by the division of labor, and it is a kind of endogenous dynamic dominance model, which is the trade theory and trade policy It is an endogenous dynamic advantage model, a unified model of trade theory and trade policy, a unified model of domestic trade and international trade, capable of integrating various trade theories, and a new development of trade theory.

Since the 1980s, a group of economists, represented by Yang Xiaokai, have used super-marginal analysis to formalize the economic ideas of classical economics about division of labor and specialization, merging consumers and producers into one, and developing into an emerging classical trade theory.

The theory shifts the object of study from the optimal allocation of resources under a given economic organizational structure to the interaction between technology and economic organization and its evolution, and seeks to introduce exogenous comparative interest factors into the trade theory model based on increasing returns to scale of emerging classical economics, and to unify the traditional trade theory and the new trade theory within the framework of emerging classical trade theory.

The endogenous division of labor and specialization emerging classical trade model of this theory (Sachs, Yang and Zhang, 1999) suggests that as transaction efficiency increases from a very low level to a very high level, the equilibrium level of international and domestic division of labor increases from both countries being fully self-sufficient to both countries being fully dividing up their labor, and that in the transition phase, two types of dualistic structures may emerge.

The phenomena of economic development, trade and changes in market structure are all different facets of the evolutionary process of the division of labor, and there is an inherent core of consistency between trade, which arises in a process of improvement in the efficiency of transactions and develops from domestic trade to international trade.

6 Contemporary Changes in Editing

Current

Changes in contemporary international trade are mainly characterized by the rapid growth of intra-industry trade and trade among developed countries. The so-called intra-industry trade (intra-industry

trade) is a concept opposed to inter-industry

trade as explained by traditional international trade theories, and refers to trade between products within the same industry, that is to say, a country imports as well as exports the same type of product.

The emergence of these phenomena has challenged traditional theories of international trade. A portion of trade that accounts for a significant portion of world trade does not occur because of differences in comparative costs or

differences in resource endowments. In order to explain these new phenomena of international trade, a large number of economists, represented by Krugman, Raymond Vernon and others, have put forward a variety of new doctrines. These doctrines and traditional international trade theory

Theory is both different and related. We call these doctrines the new international trade theory.

Typing is not easy, if satisfied, hope to adopt.