Trade Beyond Borders
International trade involves the exchange of capital, goods as well as services that takes place across international territories or borders this is quite an important trade in most countries and contributes to a share that is significant in these countries Gross Domestic Product (GDP).this trade has been present throughout much of the historical days further more its economic, political as well as social importance has been on the rise in recent centuries. Advanced transportation, industrialization, globalization, multinational corporations as well as outsourcing have all have major impacts on the international trade and its increase is crucial for there to be continuance of globalization. Without the existence of international trade then it would mean that many countries would have a limited type of goods and services within the borders of their countries.
The trade theory has a central place in the analysis of economics and is what actually underpins the free trade doctrine. Free trade doctrines have long and fascinating history all over the world.
David Ricardo was an economist whose most important work was the principal of political economy and taxation and it was made up of the theory of international trade that the came up with and in addition, the theory of value, wages, rent and profit, theory of economic development and theory of accumulation.
David Ricardo’s contribution was set to be a demonstration of the fact that even though one country might be absolutely more efficient than another in how they produce goods that they can trade, this would not be a barrier and never the less trade would still is mutually advantageous.
Ricardo made analysis of comparative cost which was a very powerful constituent of free trade since it demonstrated that benefits accrue to trade even if one country’s economy is more efficient than another country’s .due to the expansion of the word’s economy the economies that were leading emerged that was more efficient than others over a wide range of output. However this did not serve as destruction to the trade basis. This on the contrary was argued by many economists even strongly for free trade.
Ricardo recognized that it is not absolute values but relative values that are fundamental when it comes to the operation of market economy. This was a critical insight to how further the theory of trade was developed.
Therefore the recognition of the principal that a country will benefit if they specialize in the commodity which it has comparative advantage and exports it to another country for exchange of commodities that it has comparative disadvantage over which is the fundamental doctrine of free trade there was enormous insight that Richardo showed when he drew attention to the principle of comparative cost. Even though absolute advantage forms the basis of trade, it is likely in practice to be applicable to just but a fairly limited range of goods for instance the trade in food stuffs and raw materials done between tropical and temperate zones. In contrary comparative advantage is applicable whenever the productivity is different when a comparison is made between two or more commodities.
