Explain how ‘difference in national resources’ act as basis of international trade.
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Answer:
Natural resources account for 20% of world trade, and dominate the exports of many countries. ... The instruments used include export taxes, price controls, production quotas, and domestic producer and consumer taxes (equivalent to trade taxes if no domestic production is possible).
Basis of International Trade. A country specializes in a specific commodity due to mobility, productivity and other endowments of economic resources. This stimulates a country to go for international trade. The basis of international trade lies in the diversity of economic resources in different countries.
There are three types of international trade: Export Trade, Import Trade and Entrepot Trade.
There are two main categories of international trade—classical, country-based and modern, firm-based. Porter's theory states that a nation's competitiveness in an industry depends on the capacity of the industry to innovate and upgrade.
It enables a country to obtain goods which it cannot produce or which it is not producing due to higher costs, by importing from other countries at lower costs. (iii) Specialisation: Foreign trade leads to specialisation and encourages production of different goods in different countries.
The Father of Free Trade. “David Ricardo: Theory of Free International Trade” by Robert L. Formaini, in Economic Insights
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