International Trade Essay
Technological advancements have led to dramatic fall in communication and transportation costs, while a number of liberalization policies have guaranteed free exchange of products or goods and services from number of tariffs as well as non-tariff barriers. In representing economic globalization, international trade has always been considered as a controversial topic, as World Trade Organization (WTO) has conferenced. The existing controversy that has surrounded trade are as result of the fact that both the interest groups and the public at large perceive their welfare as unswervingly influenced by international trade policies. Although the societal groups and export oriented companies benefit from export pressure of regional and global liberalizations agreements, civil societies and domestically oriented societies oppose attempts of trade liberalization and the expansion of regional trade agreements and the WTO authority.
International trade among all the other branches of economics, has more statistical information which is most detailed and extensive. Therefore, the goal of this research paper is presenting the main theoretical discussions that revolve around international trade, provide empirical evidence and also identify the recent developments in the studies of political economy of international trade. Theoretical Framework of International Trade Theoretical framework trade is generally viewed by the liberal theorists of the international political economy as appositive sum that promotes common benefits to companies, states and individuals. Despite the fact that liberal theory has considerably developed until 18th century, the rules that were articulated by David Ricardo and Adam Smith acts as major aspects of theoretical justifications Adam Smith who lived between 1776 and 1993 that benefits of freed trade are realized as result of absolute advantages.
“If an alien country can supply to us a commodity which is cheaper than the way we can make it by ourselves, we better buy it from that country so that we can have some advantage” (Jones et al 233-253). The theory of David Ricardo who existed between 1817 and 2006 is formed ion the basis of comparative advantages. Therefore, that individual who own abundant production factors supports free trade while those who own scarcely endowed factors do not. According to the Freund theory of 2004 shows that increased or decreased exposure to trade intensifies either urban rural or class conflict depending on the endowment factors of the individual countries (Freund et al 181-189). Whereas, Stolper-Samuelson and the Heckscher-Ohlin focus on the endowment factor, firm based or sectorial theories of trade preferences use the Ricardo model or the specific factors model.
The reason behind this is that there is at least one factor of production which is immobile. All the factors that import competing sectors generally loses from freed trade while those factors that are tied to export oriented sectors win. In this, the research is directly related to the latest improvements of board data methods that allows considering unobservable heterogeneity. Through the inspiration of Newton’s law, the econometric model of gravity model has developed to be an essential too in simulation of flows in international trade (Vollrath 265-280). Early applications of the model was rather instinctive in the absence substantial and theoretical claims. Such applications were the criticism objects that concerned the lack of profound theoretical claims. Some of the researches that have applied gravity model those that were done by Linnemann in 1996, Poyhonen in 1963 and lastly Beckerman research of 1956 (Vollrath 265-280).
Estimation Methods Several estimation methods based on gravity model were applied. They claimed that that the standard cross-section procedures have effects of producing results that are biased. This is because the method has no control over heterogeneous trading relations. For example, the effects of linguistic, cultural and historical links in trade flows cannot be easily observed. It is also difficult to account the existence of minorities or past membership in the same area of trade can also lead to unfair estimates. Econometric relevance and economic relevance are the two important things depended on by the choice of either random effect model or fixed effect model methods. As per Freund, There are unobservable time variables from economic point of view, which are hard to be reckoned and may influence trade volumes and descriptive variables.
The inclusion of fixed effect in an econometric perspective the random effects are preferred. This is because rejection of the null supposition of unobservable physiognomies is less plausible (Freund et al 171-189). Data Statistics In the process of collecting data regarding the international trade, secondary sources of data collection were not primarily used. There is limited access of Trade map without registration for annual trade flow products up to the forth level of harmonized System. The survey cut across the various demographics of age, gender and ethnicity. In this section, a sample size of 5,766 that consisted of both males and females stood identified and requested to respond to various questions regarding the international trade (Jones et al 233-253). People of various age i.
e. Following the rise of global economy, it was established that 78% of most country’s economy was as result international trade while 22% was through other economic means. According to one of the studies carried out by the global association of traders in United States, it was found that a number of social networking sites has boosted international trade. In sample of 678 multinational corporations, it was observed that 42% of the corporations relied on social media as it primary method of advertising its products while 58% had other means of advertisements. As per the research, international trade contributed around 69. 2% of the world’s economy while 21. Presenting the main theoretical discussions that revolve around international trade, provide empirical evidence and also identify the recent developments in the studies of political economy of international trade was also our areas of concern.
In a sample size of 220 countries, 43. 4% relied on international trade as the primary source of capital and the 56. 6% had alternative sources of capital. Figure 1. Consequently, the country suffers a shortage of the goods shipped for the foreign exchange resulting in inflation. For instance, India exports sugar, thus, exalting the prices for the sugar in the internal market (Jones et al 233-253). It also brings about rivalries where organizations involved in the global develops grudges amongst themselves due to the competition for the customers. Countries producing similar goods create war with their competitors in the market. Works Cited Davidson, Russell, and James G. Venables. The spatial economy: Cities, regions, and international trade. MIT press, (2001): 75-92. Jones, Ronald W. , and Henryk Kierzkowski. Vollrath, Thomas L.
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