International trade among nations is an old practice that can be traced back to early Assyrian, Babylonian, Egyptian, and Phoenician civilizations. These and other ancient civilizations acknowledged that trade can be tied directly to a superior quality of life for the citizens of all the partners. Today, the practice of trade among nations is growing by extraordinary rapidity, letting hardly a person on earth unaffected in some way by the growing trade among nations.The exchange of goods and services across international borders is a significant share of GDP. In today's competitive market environment, globalization, industrialization, mergers and acquisitions and outsourcing are major reasons for the increasing international trade.
[...] So, developed countries switch from being exporters to importers as production becomes concentrated in lower-cost foreign locations and products are standardized. At this stage the factor for competition is the cost. The stages of the Product Life-Cycle are Market Introduction stage, Growth stage, Mature stage and Decline stage. In the Market Introduction stage, costs are high and sales volume is low because customers need to be prompted to try the product in order to create demand and possible competitive advantage. [...]
[...] Unskilled labor force producing traded goods in a high- skill country is worse off as international trade increases, because, relative to the world market in the good they produce, an unskilled technologically advanced production-line worker is a less abundant factor of production than capital (Stolper & Samuelson, 1941). On the other hand, Leontief disputes that nations with abundant natural resources generally have a comparative advantage in products using those resources. Leontief suggests that since US is a K-abundant economy it should be an exporter of K-intensive goods and an importer of L-intensive goods. [...]
[...] These may be potential technology knowledge spillovers, an association of a region on the part of consumers with a product and high quality that would put pressure to the market, or an association of a region on the part of applicable labour force. On the other hand, clustering may send employees to rival companies or increase competition to a level that mark-ups would need to decrease. Overall though, internationally competitive related/supporting industries benefit from the investment in advanced factors of production. [...]
[...] The model attributes the benefits of trade to the differences among countries in the opportunity costs of producing the same commodities. The Ricardian model considers that specialization of production shifts the resources from low productivity industries to high productivity industries, thus increasing the total collective output of products in both countries. To better understand this, consider the following table: Country A Country B Country A Country B Before Trade After Trade After specialization, both countries produce more units per product (15 over 10 for country product A over 8 for country product B). [...]
[...] The main positive effect of mercantilism is the generation of wealth for the controlling countries like France, Britain, Spain, and Portugal, that exploited distant foreign lands in Latin America, Caribbean, and India through the establishment of trade relations and colonization. On the other hand, mercantilism assists to the heavy exploitation of the local inhabitants of the colonies and to the birth of slavery and bonded labor. Mercantilism is heavily citicized in the late 18th century. Critics view mercantilism leading to economic nationalism as one nation's surplus is another nation's deficit. [...]
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