Page 118 - GLOBAL STRATEGIC MARKETING

Two paradigms have dominated explanations of international trade for five

centuries, mercantilism (1500–1750) and free trade. Both paradigms have
profoundly influenced the trade policies of nations and national competitive

advantage, which depends on the capacity of industry to innovate and
upgrade. Absolute advantage is one of the most traditional trade theories

known in international marketing. This theory is associated with Adam
Smith, whose prevailing mercantilist ideas on trade developed the theory
of absolute advantage. Comparative advantage is another classical

theory. David Ricardo (1817) first put this theory forward and it was then
developed by the great classical economist John Stuart Mill. There was

also discussion of comparative advantage (neoclassical theory), which
focuses on the combination of capital and labour.

The unit also investigated the practice of international trade, which

included trade barriers and protectionism. Trade barriers meet the need to
protect a country’s infant industry, to protect domestic industries from

unfair foreign competition and to ensure health. Protectionism includes
tariffs, taxes and duties, import quotas, restrictions on the quality of goods,
embargoes, export subsidies and foreign exchange control. The unit

concluded with a study of less developed countries and the theories that
explain the reasons for development or the lack of it.