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exploiting the resources of their colonies. In recent times, former colonies
(including much of Africa) have struggled to diminish their reliance on the

former colonial powers. Trade between mercantilist countries and their
colonies created huge profits; mercantilist and colonial policies expanded
national wealth and created armies and navies to control colonial empires

and protect shipping. If all nations were to barricade their markets from
imports and push their exports onto others, international trade would be

severely restricted. Colonial policies also kept potential markets poor
because they received little money for raw materials but were charged
high prices for finished goods. Thus the colonial powers’ markets always

had limited potential. McDonald and Burton (2002) state that, in the pursuit
of international self-interest, mercantilist polices were based on the state

custom of commercial and industrial enterprise. Typical mercantilist
polices include the granting of monopolies, patent rights and subsidies to
exporters, national laws dictating that goods must be transported in the

ships of the home country, and tariffs or quotas on imports to encourage
and protect home production.

3.5.2 Free trade

Free trade encompasses the principles of comparative advantage that

animate the World Trade Organisation (WTO). Therefore, free trade
remains the essential background for the trade policies in most of the

industrialised countries such as Japan, the USA and most of the European
Union. This principle demonstrates that dissimilar national production
possibilities are the basis of international trade that benefits both trading

parties.

3.5.3 Factor production theory

Factor production theory states that countries produce and export goods
that require abundant resources (factors) and import goods that require

resources in short supply, such as oil, gas and minerals. The theory states
that a nation has two types of resources at its disposal: land on the one

hand, and labour and capital equipment on the other. The theory predicts
that a country will specialise in products that require labour if the cost of
labour is low, relative to the cost of land and capital, and vice versa.