Modern theories of the international trade

1.2 Modern theories of the international trade

The theory of the technological break

The theory of the technological break is the modern theory of the world trade. The theory was developed by the American economists G.Hafbauer, R.Vernon.

If in branch technological innovations are applied, country will receive comparative advantages. If the country makes the goods with smaller costs, it will receive additional profit in the world market. Therefore exporters are interested in increase in manufacture of the given goods and its realization in the world market. While break exists, it renders positive influence on export of goods in which manufacture new technologies are used.

The theory of the product life cycle

R.Vernon, C.Kindelberger, L.Uels have developed the theory of the product life cycle. This theory explains development of the world trade by finished goods on the basis of stages of its life in the market.

Development of the world trade by finished articles depends on stages of a life.

The product life cycle is a familiar one in marketing. A product is launched, developed, goes through a period of growth, enters maturity, declines, and eventually dies.

At the first stage there is a development of new production. Manufacture of a new product has small-scale character, demands high qualification of workers and concentrates in the country of an innovation.

At the second stage of growth demand for a product grows also its manufacture extends. The product becomes more standardized, the competition between manufacturers increases and export extends.

The large-lot production is typical of a maturity. The product life cycle passes in a stage of decline, demand is reduced.

The theory of the product life cycle is realistic enough reflects evolution of many branches. However is not a universal explanation of tendencies of development of the international trade .

Michael Porter’s the theory of competitive advantage

In 2-nd half XX centuries in the world trade have occured changes. In commodity structure of the world trade, sale of finished goods began to prevail. In 1990 the American economist M.Porter has published research « Competitive advantages of the countries ».

M.Porter has created the original theory of competitive advantage of the country. The central place in his concept is occupied with idea of a national rhombus.

Determinants of competitive advantage is characteristics of the most significant sources of competitive advantage of the companies of processing industries.

1.  The Factor of a condition

2.  Conditions of the internal demand, causing a scale effect

3.  Presence of adjacent and supporting branches

Thus, the theory of a competition connects inclusion of the country and separate firm in the world trade with conditions of a competition.

The Theory of a scale effect

P.Krjugman, R.Drize, G.Hafbauer have developed the theory of a scale effect.

At the certain technology and the organization of manufacture long-term average costs are reduced in process of increase in output, i.e. there is an economy caused by mass production.

The effect of mass production was realized, necessary capacious enough market. International trade allows to expand commodity markets. It is offered to consumers to more production and lower prices.

The theory of a scale effect is not universal.

So, nowadays the advantages in the competition are determined neither by the size of the country, nor by rich natural resources or by the power of the financial capital. The determinatives are the educational level and volume of the knowledge accumulated by a society.

Chapter II. The international trade at the present stage of development

2.1 Concept and laws of development of the international trade

Basis of economic relations in the world economy is international trade.

International trade is sphere of the international commodity and monetary relations on an exchange of products of work (the goods and services) between sellers and buyers of the different countries».

International trade includes export and import of the goods. Trading balance is parity between export and import

The structural shifts occuring in economy of the countries under influence of a scientific and technological revolution, specialization and cooperation of industrial production, strengthen interaction of national economy.

It promotes activization of the international trade. International trade grows faster production. Foreign trade became the powerful factor of economic growth.

International trade influences economy of each country.

International trade is mutually advantageous, as conducts to specialization and an exchange. Benefit is taken from a difference in costs in the different countries. It allows to receive economy from scale.

International trade is characterized by three basic parameters are: commodity circulation, commodity structure and geographical structure.

The term "foreign trade" is understood as trade between the countries, consisting of export and import of the goods and services.

Kinds of the foreign trade are:

1.  sale of finished goods;

2.  sale of machines and the equipment;

3.  sale of raw material;

4.  sale of services.

The parameters reflecting participation of the country in the international trade, are quota of export and of import.

Participation of the country in the international trade is caused by a level of its economic development, the sizes of territory, a population, problems and the purposes of economic policy.

Law of the world trade development

World trade grows very quickly. Export shares of the countries increase. Densities of ready industrial, high technology production grows. The export prices of machines and the equipment quickly grow.

For an estimation of advantage of the international trade for the country, economists use an index of conditions of trade.

The important tendency in the international exchange is the increase in the world market of services, especially tourist, transport, financial. Leaders of this market are the advanced countries.