Page 40 - International Marketing

NPP

42 International Marketing BRILLIANT'S

especially Becker, Kennen & Kessing. Whereas the Factor Proportions
theory considers labour as a homogenous factor, it is not so in the real
world. Infact, for export of manufactures the skill level of labour is a very
important determinant. Labour can be basically divided into skilled and
unskilled labour. On the basis of empirical testing, Kessing concluded
that patterns of international trade and location were predetermined for a
broad group of manufacturers by the relative abundance of skilled and
unskilled labour. For example, a developing country which has more
abundant supply of unskilled labour will specialize and export those goods
which are relatively more intensive in unskilled labour. Imports, on the
other hand, will consist of those goods which are more skill intensive.
5. Natural Resources
This theory was first proposed by Vanek. This theory includes re-
sources of a country also in the explanation of its trade structure. The
basic hypothesis of this theory is that the country will export those prod-
ucts, which are more intensive in that natural resource with which it is
relatively more endowed and will import those items, which use relatively
more of those natural resources which are scarce.
6. R & D and Product Life Cycle Theories

According to these theories, the commodity composition of trade
can be explained in terms of relative research efforts and the consequent
technological gaps between the trading partners. A number of economists,
especially Vernon, have contributed to the development of this theory. It
is argued that the industrial countries commit more resources to research
and development efforts and as a result, develop new products. In the
initial stage of manufacture, these countries will be monopolists and will
enjoy easy access to foreign markets. This can explain the trade between
the developed and the developing countries as well as trade among the
industrialized countries themselves. Subsequently, a process of imitation
will start and other countries will start manufacturing the same product.
The initial comparative advantage will then disappear and the manufactur-
ing centers in fact can move from the developed to the developing coun-
tries which have low labour cost. This has already happened in the case of
mature manufactured products with low labour skills intensely, like tex-
tiles. Many developing countries have turned into exporters of textiles
from being net importers some years ago.
7. Scale Economies
The trade structure is also sought to be explained in terms of scale
economies. According to this theory, there is a relationship between the
size of the internal market, average unit cost of production and export