International Trade Theories
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"International trade & economic growth are related to each other in many ways"
DRAWING UPON THE RELEVANT ECONOMIC THEORY, COMMENT ON THIS STATEMENT. ILLUSTRATE WITH EXAMPLES WHERE APPROPRIATE!
Nations trade with each other because it is in each country's national self-interest to do so. If nations specialise in the production of those products for which they are relatively more efficient, an export those products in exchange for imports produced relatively more efficiently in other countries, then all countries will have more goods and services to consume than if each country produced just for themselves. This occurs because each country will be using their nation's scarce resources more efficiently. The increased production (and consumption) possibilities in trade, means they are all better off by having participated in that trade, even though some specific businesses and their employees forced to compete with the cheaper foreign imports may be worse off.
The relationship between foreign trade and economic growth runs both ways. As an economy grows, this will affect its foreign trade (volumes and prices). At the same time, foreign trade (or the trade policy pursued by the country) may have a significant impact on how an economy grows as well as on growth rate. An economy may grow as a result of increases in factor supplies (e...