International Trade Theory

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International trade theories are a set of economic models that aim to explain trade patterns, meaning which goods are exported and imported, and who imports and exports those goods. The theories allow us to say something about the costs and benefits of globalization to whole economies and individual groups within them.

Modern international trade theory is based on David Ricardo’s “Law of Comparative Advantage,” an important and long-lived concept, which says that a country should engage in trade with another country, even if the first country is more efficient in producing all the goods. The idea is that even if a country has absolute advantage (being more efficient) in the production of goods, that country may be better off trading with another (less efficient) country by exploiting lower relative opportunity costs.
Original languageEnglish
Title of host publicationEncyclopedia of International Strategic Management
EditorsChristian Geisler Asmussen, Niron Hashai, Dana Minbaeva
Number of pages3
Place of PublicationCheltenham
PublisherEdward Elgar Publishing
Publication date2024
ISBN (Print)9781800884038
ISBN (Electronic)9781800884045
Publication statusPublished - 2024


  • International trade theory
  • Law of comparative advantage
  • Global value chain
  • Trade policy
  • New trade theory

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