This article at explaining why countries engage in international trade. Now days it is not uncommon to find that the main objective of a trade policy of almost all countries is to promote international trade. Countries have gone ahead to engage in trade negotiations all in the interest of enabling international trade. But then, why do countries engage in international trade? Why are there global attempts to liberalize international trade rather than promote autarky-a situation of no international trade? Does engaging in international trade contribute to income distribution, factor employment and poverty reduction? In short, must a country engage in international trade in order to develop? This article delves into theories of trade so as to understand why countries engage in international trade.
Economist believes that if countries engage in international trade, they can mostly benefit under a free international trade environment. To get a clear perspective to this claim, I will glance though five major main theories on international trade-the Ricardian Comparative advantage Model on gains from specialization and opportunity cost theory, Heckscher-Ohlin model who believes that factor proficiency differences are the reasons why countries engage in international trade because of the gains from specialization and income distribution effects, the new international trade theory which examines the economies of scale and the Heterogeneous firms theory which explains why countries engage in international trade basing on a firm level perspective.
Read more on Ricardian Comparative advantage and Gains from Specialization and how it relates to why countries engage in international trade
Or Continue and find out what Heckscher-Ohlin says factor proficiency and how the model explains the reasons why countries engage in international trade
Or read how economies of scale according to New Trade Theory explain why Countries Engage in international trade