Question

Summarize the classical, country-based international trade theories. What are the differences between these theories, and how did the theories evolve?

Answer 1

• Classical, country-based international trade theories -
  Classical and country-based trade theories laid emphasis on the individual countries in question. A key aspect of these theories are price levels, which influence a customer's decision to buy a good/service.
  
• Differences between the theories -

Mercantilism	Absolute Advantage	Comparative Advantage	Heckscher-Ohlin
The mercantilism theory supports more exports than imports to maintain a trade surplus for a country	When a producer can produce a greater quantity for the same price level or the same quantity for a lower price level, this forms the basis of this theory	This theory mentions that countries would generally tend to produce goods/services that have lower opportunity costs, to increase profits	Countries generally export whatever commodities they find easy to produce in large quantities
Evolution - From the 16th century with an aim to increase trade surplus and avoid trade deficits	Evolution -Proposed by Adam smith in 1776, who criticized mercantilism	Evolution - Proposed by David Ricardo in 1817 to account for the fact that two or more countries might be equally competent	Evolution - Developed from the early 1900's when a country had to identify which products would provide comparative advantage to a country.