Ricardo’s idea (comparative advantage) Predicts that different factors of production specializes in different economic activities based on their relative productive differences. The problem is implicit in the Richardian model itself because the model implies complete specialization in equilibrium. This in turn means that the differences in labor requirements cannot be observed, since imported goods will almost never be produced in the imported country.(Samuelson, 1995) On the other hand (Robert B. Ekelund Jr., 1997) Mercantilism Theory, states that countries can become wealthy and powerful states. The mercantile system seeks to describe the system of political economythat sought to enrich a country by restraining imports and encouraging exports. The mercantilist policies were the outgrowth of the relationships between governments and nation states and their mercantile classes. In exchange for paying levies and taxes to support the armies of the nation states, the mercantile classes induced governments to enact polices that would protect their business against foreign …show more content…
He also stated that companies acquire these because of cost advantages or in order to learn about advanced technical methods used abroad. Also that trade enables firms to acquire resources that are not available at home. The statistics of trade throughout the years was also examined world trade approached eleven trillion (U.S.) in 2004 and was triple what it was in 1990. Services trade accounts for about 25 percent of total trade. Since 1970, average annual growth in world merchandise exports is estimated at about 12 percent.
International trade between countries and across continents has existed for centuries including previous civilizations. Traditionally international trade consisted of traded goods like textile, food items, spices, precious metals, precious stones and objects of art and various items across the borders. International trade has come a long way since the earlier times and today it has taken two dimensions. It is a fact that the impact of trade between two countries was not limited to economics alone but fuelled by political, social ambitions too.(Menger,