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International trade is the exchange of capital, goods, and services across international borders or territories. international trade has existed throughout history (for example Uttarapatha, Silk Road, Amber Road, salt roads), its economic, social, and political importance has been on the rise in recent centuries. To understand the pattern in international trade, Different trade theories are postulated. Some famous trade theories are: Mercantilism Absolute Advantage Theory Comparative Advantage Theory Hecksher-Ohlin Factor endowment theory Product Life Cycle Theory New Trade Theory Porter’s Diamond Theory for competitive advantage Restrictions on imports – tariff barriers, quotas or non-tariff barriers. Accumulation of foreign currency reserves and gold and silver reserves. (known also as bullionism) Granting of state monopolies to particular firms especially those associated with trade and shipping. Subsidies of export industries to give competitive advantage in global markets. Government investment in research and development to maximize efficiency and capacity of domestic industry. Allowing copyright / intellectual theft from foreign companies. Limiting wages and consumption of the working classes to enable greater profits to stay with the merchant class. Control of colonies, e.g. making colonies buy from Empire country and taking control of colonies wealth. England Navigation Act of 1651 prohibited foreign vessels engaging in coastal trade. All colonial exports to Europe had to pass through English first and be re-exported to Europe. Under British Empire, India restricted in buying from domestic industries and were forced to import salt from the UK. Protests against this salt tax, led to ‘Salt tax’ revolt led by Gandhi. In seventeenth Century France, the state promoted a controlled economy, with strict regulations about the economy and labour markets In the modern world, mercantilism is sometimes associated with policies, such as. Undervaluation of currency e.g. government buying foreign currency assets to keep the exchange rate undervalued and make exports more competitive. Government subsidy of industry for unfair advantage. China has been accused of offering too much subsidised investment for industry, leading to over supply of industries such as steel – meaning other countries struggle to compete. Surge of protectionist sentiment, e.g. tariffs on imports. Copyright theft
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