The theoretical basis for the international trade. The modern trends of the international trade development (43063)

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Non-state Educational Institution

Chelyabinsk Institute of Economics and Law

after M.V. Ladoshin

Faculty of Management, Finance and Law



Performed by: Kichutkina N. N.


Checked by: Salyakhova G. Kh.




The traditional and most advanced form of the international economic relations is the foreign trade. On a share of trade it is necessary about 80 % of all volume of the international economic relations.

Theories of the international trade beginning from the English classical political economy, have passed a number of stages together with the development of the world economic science.

The chosen theme is actual as theories of the international trade benefit since they help to explain what competitive production it is possible to make in a particular country or region, where the company can organize effective manufacture of given products and whether the state will interfere with barter between the countries.

The basic purpose of this term paper is studying both theories revealing the principles of optimum participation of national economies in the international barter, and objective laws of development of the world trade, including Russia’s foreign trade.

The primary goals of this term paper are:

1. To consider what international specialization is the most effective and beneficial for the separate countries and regions.

2. To define the basic directions of commodity streams between the countries and factors of competitiveness of separate countries in the world market;

3. To analyse the role of Russia in the world trade.

Area of research of the international economic relations is theoretical problems of organizing foreing trade in Russia and abroad. Object of research is the external world.

The theoretical and methodological basis of the term paper are the of founders of the economic science, modern domestic and foreign scientists. However this theme is widely discussed in the periodic economic editions, such as « the Russian External Economic Bulletin », "Expert".

The practical importance of the term paper is s that its results can be used in the educational process while studying economic disciplines.

The term paper consists of the introduction, three chapters, the conclusion and the list of the literature. In the introduction the urgency of the chosen theme is proved, the purpose, problems, area and object of the research is defined, scientific novelty, theoretical and practical values of work are considered.

In chapterI « Theories of the international trade » classical and modern theories of the world trade are considered; in chapter II the concept of the world trade, and also the law of development of the international trade and the basic directions of the foreign trade streams between the countries; in chapter III the role of Russia in the international trade has been analysed. In the conclusion of the term paper the basic results of the carried out researches are stated, conclusions and practical recommendations are made.

Active participation of the countries in the foreign trade allows them to use resources available in the country more effectively, to join the world achievements of science and technology.

Chapter I. Theories of the international trade

    1. Classical theories of the international trade

A.Smith’s Principle of absolute advantage

The policy of free-trade has been developed by English economist A.Smith. He has created the new theory of the world trade. Не considered, that it is necessary to import the goods from the country where costs absolutely it is less, and to export that goods, which costs below exporters.

A.Smith's approach has received the name « the Principle of absolute advantage ».

Each country should specialize on manufacture of the goods which average costs it is less, than average costs in other countries.

Smith has proved, that free trade will be favourable to its all participants.

If a country makes some goods more on a unit of cost than its competitors do, it has the absolute advantage in manufacturing these goods. It is favourable for the country– manufacturer to export these goods, and it is favourable for other countries to buy them since it would be more expensive to produce them.

D.Rikardo’s Principle of comparative advantage

D.Rikardo has formulated the theory of comparative costs.

He has defined a price zone inside of which the exchange will be favourable to everyone. D.Rikardo has shown, that the international exchange is possible and desirable in interests of all countries.

An economic theory which claims that all countries will be better off if each of them concentrates on doing the things it does best.

So, most countries have one thing they do better than anyone else. By concentrating on one activity they can import the things they produce less well.

Foreign trade should be free.

Theory of Hecksher - Olin

The new model has been created by the Swedish economists Ales Hecksher and Bertel Olin.

Theory has received the name of the theory of proportional factors.

The countries aspire to export that goods in which production they have superfluous factors of manufacture. And to import the goods in which scarce factors for the country are used.

They considered, that it is possible to induce the countries to development of manufacture and export of that production where superfluous and cheap factors of manufacture are used.

Leontiev’s Paradox

Vasily Leontiev an American economist. He investigated structure of export and import of the USA.

He has found out, that in export трудовое потребление goods prevailed, and in import prevailed capital-intensive. The theory has received the name «Leontiev’s paradox ».

V. Leontiev has assumed, that greater productivity of the American work is connected with higher qualification of the American workers.

So, V. Leontiev has found out, that the branches being successful exporters, possess higher labour input. And other branches colliding with a competition of the import goods, not so are successful.

1.2 Modern theories of the international trade

The theory of the technological break

The theory of the technological break is the modern theory of the world trade. The theory was developed by the American economists G.Hafbauer, R.Vernon.

If in branch technological innovations are applied, country will receive comparative advantages. If the country makes the goods with smaller costs, it will receive additional profit in the world market. Therefore exporters are interested in increase in manufacture of the given goods and its realization in the world market. While break exists, it renders positive influence on export of goods in which manufacture new technologies are used.

The theory of the product life cycle

R.Vernon, C.Kindelberger, L.Uels have developed the theory of the product life cycle. This theory explains development of the world trade by finished goods on the basis of stages of its life in the market.

Development of the world trade by finished articles depends on stages of a life.

The product life cycle is a familiar one in marketing. A product is launched, developed, goes through a period of growth, enters maturity, declines, and eventually dies.

At the first stage there is a development of new production. Manufacture of a new product has small-scale character, demands high qualification of workers and concentrates in the country of an innovation.

At the second stage of growth demand for a product grows also its manufacture extends. The product becomes more standardized, the competition between manufacturers increases and export extends.

The large-lot production is typical of a maturity. The product life cycle passes in a stage of decline, demand is reduced.

The theory of the product life cycle is realistic enough reflects evolution of many branches. However is not a universal explanation of tendencies of development of the international trade .

Michael Porter’s the theory of competitive advantage

In 2-nd half XX centuries in the world trade have occured changes. In commodity structure of the world trade, sale of finished goods began to prevail. In 1990 the American economist M.Porter has published research « Competitive advantages of the countries ».

M.Porter has created the original theory of competitive advantage of the country. The central place in his concept is occupied with idea of a national rhombus.

Determinants of competitive advantage is characteristics of the most significant sources of competitive advantage of the companies of processing industries.

1. The Factor of a condition

2. Conditions of the internal demand, causing a scale effect

3. Presence of adjacent and supporting branches

Thus, the theory of a competition connects inclusion of the country and separate firm in the world trade with conditions of a competition.

The Theory of a scale effect

P.Krjugman, R.Drize, G.Hafbauer have developed the theory of a scale effect.

At the certain technology and the organization of manufacture long-term average costs are reduced in process of increase in output, i.e. there is an economy caused by mass production.

The effect of mass production was realized, necessary capacious enough market. International trade allows to expand commodity markets. It is offered to consumers to more production and lower prices.

The theory of a scale effect is not universal.

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