Adam Smith And David Ricardo's Theory Of International Trade
Introduction
International trade is the exchange of goods and services between the two or more countries. This trade leads to rise in the world economy, in which prices, supply and demand are affected by the global market makers. Trading international gives opportunities to countries to exposed goods and services not available in their own countries. Trade openness is the system with no barriers in trade and categorized by absence of tariffs, taxes and any other regulations that hindrance the functioning of the market.
In the world economy since 1950 there has been an immense liberalization of world trade and in the year 1947, General Agreement on Tariffs and Trade (GATT) was established and had provided the rules for the system. GATT had mainly dealt with trade in goods but the WTO and its agreements now concealment trade in services and in traded inventions, creations and designs the intellectual property.
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Mercantilism, as the first trade theory in the sixteenth century, was based on the gold and silver was the main determinant of countries national wealth. And it was best interest of country to encourage exports and discourage imports. According to this theory, trade was zero-sum gain that is gains by one country and loss by another. Moreover this theory has drawback and given way to Adam Smith’s theory of absolute advantage and David Ricardo’s theory of comparative advantage, both the theory justified that trade is a positive-sum gain that is benefits to all countries.
Many countries they want to participate in trade knowing there are advantages; however trade is also associated with disadvantages. In this essay, I would like to argue that international trade business outclass disadvantages by
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