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Hi is this student.

Now we are in chapter five trading internationally.

Chapter five, trading internationally begins by defining exports, imports, merchandise,

goods trade.

And so we trade the chapter, then explore resource an

institution with explanation of why nation trade.

Leading into discussion of six major theories of international trade,

mercantilism absolute advantage, comparative advantage, put a life cycle, strategic

trade and the national competitive advantage of industry.

In this video, I will cover the theories of international

trade, of mercantilism, absolute advantage, comparative advantage to the life

cycle and dimensional comparative advantage of industry.

So I come and let you review the terminologies are

the definition of the terms learning objective.

Use the resource base and institution view to explain why

nation trade, identify and define the classical and model theories

of international trade explained the importance of political realities governing

international trade.

This is the term definition of explored and import merchandise,

good trade and service trades.

I want you to review the definition from the slide

and uh, the definition of balance of trade, balance of

trade trade deficit occurred when a nation import more than

it exports.

There is some purpose it's uh occur when an asian

export modern, it's important.

So um international trade is far more complex than domestic

trade. So why do nations go through the trouble of

trading internationally without getting into details?

one can certainly say that there must be economic gains

from trade more importantly, sustains must be chaired by both

sides. Otherwise there would be no willing exporters and importers.

In other words, international trades is a win win deal

according to the results.

Best view, there are economic gains from international trade because

some firms in one nation generate exports that are valuable,

unique and hard to imitate the firm and consumer from

other nations find beneficial to import according to institution.

Best view, different rules governing trade designed to determine how

such games are chair or no chair.

So here is a trade theories, timelines, you can see

the audit, uh, international trade theories is mercantilism.

It was that they were loved in uh, the mid

of between 19 1500 to 1600 and move on to

the absolute advantage by adam smith and comparative advantage.

And then, um, the new modern modern trade theories, including

factor proportions theories, international product, life cycle, nutrients, theories and

national competitive advantage by Michael Porter.

The first theory of international trade emerge in England in

the midst 1600 16th century before to ask mercantilism, it's

the principle assertion was that it is in a country

based interest to maintain a trade surplus to export more

than its imports consistent with this.

Believe the mercantilist doctrine, advocate government intervention to achieve a

surplus in the balance of trade, the flow of mercantilism

or that is viewed trade at a zero sum game,

one is wish again by one country results in a

loss by another.

It was left to a damp smith and David ricardo

to show the charts science, the chart Sinus of this

approach and to demonstrate that trade is positive sum game

we're going to discuss in the coming slide.

So another term that you need to understand what the

definition is is the protectionism um The protectionism referred to

the idea that the government should actively protect domestic industries

from import and promote export.

Uh huh Let me go back.

Mercantilism is problematic and not economically varied.

That's the flaw of the mercantilism.

Um But many political views today have the goal of

boosting exports while limiting export.

For example, china and Japan, we call them as a

new mercantilism.

Neo mercantilism.

So move on to the second trade theories, we call

absolute advantage absolute advantage.

Um um specialized in the production of good for which

each party has an absolute advantage, enable both to provide

uh to produce more and both the party can benefit

more by trading in this in a damp smith uh

book called the wealth of nations In 1776, Adam Smith

attacked the merchandise list assumption that trade is a zero

sum games.

And then submit angle that country differ in their ability

to produce good efficiently.

And that a country has an absolute advantage in the

production of a product where is more efficient than any

other country in producing it according to Adam smith country

to specialize in the production of goods for which they

have an absolute advantage.

And then trade these goods for the goods produced by

other countries.

Mhm. When each country has an absolute advantage in one

product is it's clear that trade is beneficial.

But what if a country has an absolute advantage in

both product that we're going to take a look at

the theory of comparative advantage by David ricardo.

In this graph, this field suggests that international trade is

not a zero sum game.

You can see from the graph, but a win win

game. This is because a nation can focus on and

activity that it can perform efficiently.

Why important good that is need from another nation that

have performed that activity more efficiently.

This table can see represent the example of the theories

of absolute advantage between the production of wheat and making

aircraft. The example here, the US has an absolute advantage

in making aircraft.

20 resources, verses for the resources While China has an

absolute advantage in production of wheat, 20 resources versus 80

resources both nature needs with an aircraft, but without trading

with each other, both nations would have to spend half

their resources in producing both goods by trading with each

other what nations produce more and save more.

Thus, there is a net gain from trade.

So you can review from the table these tables, it

comes from the textbook.

Mhm. So now the third uh international trade theories is

belong to David ricardo, David ricardo to dance.

So many theories, one step further by exploring what might

happen when one country has absolute advantage in the production

of all goods.

Sweet theories, absolute advantage suggest that such country might derived

no benefit from international trade.

So in his uh 1817 principle of political economy recorded

show that this was not the case.

According to ricardo theories of comparative advantage.

It makes sense for a country to specialize in the

production of those goods that is produced most efficiently and

to buy the good that is produce less efficiently from

other countries.

Even if this means buying goods from other countries that

could produce more efficiently itself.

So these text will provide a detailed example to explain

the rational of this theory.

So you can see from this example of comparative advantage

international threat theories.

These theories suggest that even though the U.

S. Has an absolute advantage in the production of both

with an aircraft over china.

As long as china is not equally less affection in

the production of both goods.

China can still specialize In the production of one good

in which it has a comparative advantage.

In this example, china is relatively less in efficient than

the U.

S. In producing weak.

If china devote all resources to wheat, It can produce

10,000 tons Which is 450 Of the 12,500 ton that

the US can produce.

However, at the maximum China can produce only 20 aircraft

Which is the mirror half of the 40 aircraft that

the U.

S. Can make by letting china specialize in the production

of wheat and importing some weed from china.

The U.

S. Is able to leverage its strength by devoting its

resources to aircraft.

The net gains are caused by competitive advantage.

Reviewed the textbook for details.

Uh Maybe this lie a little bit small.

So sorry about.

Yeah so now we look at the theories of international

trade, product life cycle, international product life cycle um Mercantilism

absolutely absolute advantage, Comparative advantage, an aesthetic picture.

But the product life cycle theories is a dynamic theories.

Every product has three live cycle stages Childress.

Mhm. Stage one Stage 1 or new product.

The production of new a new product that commands a

price premium.

With production focus in the U.

S. So state to statue.

We talk about the maturing product stage maturing stage in

which the main demand and ability to produce growth in

other developed countries.

And the station three standardized products.

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