In: Business and Management

Submitted By hungdm
Words 1878
Pages 8
The international trade theory experienced several periods of development from Classical to Neoclassical, New Trade Theory, and then the New Classical Trade Theory. The earliest over international trade had its birth in the end of 15th century and initial period of 16th century. That is, during the period of western countries’ primitive accumulation of capital and the main theory is mercantilism. It is claimed of the theory that the only form of wealth is the metal---gold and silver. People can gain them though exchange and for a nation, it is to increase the social wealth. Hereby, the way to gain gold and silver is international trade.
In the late 1790s, the point of mercantilism was challenged by the classical economists. Based on criticizing the mercantilism, Adam Smith proposed the division of labor theory. It has been 41 years from Adam Smith proposed the absolute cost in his the Wealth of Nations in 1976 to David Ricardo proposed the comparative cost in his the Principles of Political Economy and Taxation in 1817. This is the foundation period of international trade theory, that is, the Classical period. The absolute cost of Adam Smith is based on the division of labor theory. Adam introduced the division of labor theory to the field of international trade and established his absolute cost theory, thus demonstrating the fact that a nation can make the sources of each country most efficiently used to gain the increase of the total production, the enhance of consumption level and the save of labor time as long as the nation specially produce the products of which its production cost is lower than any other country in order to exchange the products of which the cost is high than any other country with its cost-low products. Adam pointed out that the base of…...

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