國(guó)際貿(mào)易理論與實(shí)務(wù)（英文版）PPT完整全套教學(xué)課件

ChapterOne

ABriefIntroductiontoInternationalTrade全套PPT課件CONTENTS05ModesofInternationalTrade04DifficultiesandChallengesinInternationalTrade03ReasonsforInternationalTrade02TypesofInternationalTradeTransactions01KeyPoints05ReviewQuestionsKeyPointsDifferenttypesofinternationaltradeDifficultiesandChallengesinInternationalTradeModesofinternationaltradeTypesofInternationalTradeTransactionsⅠ.AccordingtotheDirectionofMovementsofGoodsⅡ.AccordingtotheFormsofGoodsⅢ.AccordingtotheBoundaryofStandardsⅣ.AccordingtotheRelationshipBetweenProducingCountryandConsumingCountries01Ⅰ.AccordingtotheDirectionof

MovementsofGoodsExporttradeExporttradeisdefinedasthegoodsandservicesmanufacturedinonecountryandacquiredbycitizensofanothercountry.ManufacturedinthemanufacturingcountryTradedinaforeigncountry2.ImporttradeImporttradereferstogoodsandservicespurchasedintoonenationfromanother,andthusthereisimporttradefortheconsumptioncountry.3.TransittradeTransittradereferstotradeactivitiesthatthecommoditiespassthroughtheborderofonecountryandthentransporttoanothercountrywithoutprocessing.Goodsaretransportedfromtheproducingcountrytotheconsumingcountryviaathirdcountry’sborder.Thegoodshavetoenterandexitthethirdcountry’sgeographicterritoryorcustomsterritoryandhavetogointoitscustomsstatistics.Transittradecanbefurtherdividedintodirecttransittradeandindirecttransittrade,withthedifferenceofwhetherthegoodsarestoredinthecustomswarehouseofthethirdcountry.Ⅱ.AccordingtotheFormsofGoodsVisibletrade(1)DefinitionVisibletrade,alsoknownasinternationalmerchandisetransactions,

referstocommoditieswithtangibleforminimportandexportactivities,whichmeanstradingofgoodsthatcanbetouchedandweighed,suchascoal,oil,wood,car,orsmartphone.Thetransactionsofgoodsareobservable.Customsformalitieshavetobecarriedoutwhennationsimportandexportgoods.(2)Classification①Visibleexports:thesellingoftangiblegoods②

Visibleimports:thebuyingoftangibleTheStandardInternationalTradeClassification(SITC,國(guó)際貿(mào)易標(biāo)準(zhǔn)分類(lèi))AclassificationofgoodsusedtoclassifytheexportsandimportsofacountrytoenablethecomparingofdifferentcountriesandyearsIncludingalltangiblegoods10sections,67divisions,262groups,1023sub-groupsand1924basicheadings.Eachitemhasafive-digitcatalognumberwiththefirstdigitrepresentingthesection,thefirsttwodigitsrepresentingthedivision,thefirstthreedigitsrepresentingthegroup,thefirstfourdigitsrepresentingthesubgroups,andallfivedigitstogetherrepresentingthebasicheading.Section0-4:PrimarygoodsSection5-9:Manufacturedgoods(SITCsections5,6,7,8minusdivision68andgroup891)SectionTypesSectionTypes0Foodandliveanimals5Chemicalsandrelatedproducts,n.e.s1Beveragesandtobacco6Manufacturedgoodschieflyclassifiedbymaterial2Crudematerials,inedible,exceptfuels7Machineryandtransportationequipment3Mineralfuels,lubricants,andrelatedrawmaterials8Miscellaneousmanufacturedarticles4Animalandvegetableoils,fats,andwax9CommoditiesandtransactionsnotclassifiedelsewhereintheSITC

CategoriesofSITC2.Invisibletrade(1)DefinitionInvisibletradeinvolvestradinginternationallywithintangibleorabstractitems–thingsyoucannottouch,usuallyreferredtoasservices.Anytransactionthatisassociatedwithavaluebutisindependentofphysicalgoodscouldbecalledaninvisibletrade.DifficulttoobtainaccurateestimatesofthevalueofthetransactionsoftradeinservicesWaysofmeasuringthesetransactionsnotpreciseEstimatesareobtainedbyexaminingforeignexchangerecordsand/orthroughsurveysofestablishments.Usualcustomsrecordsordataarenotavailableforvaluingthesetransactions.Examples:customerserviceoutsourcing,overseasbankingtransactions,andthemedicaltourismindustryareallofinvisibletrade.(2)ClassificationWTOGATS’fourmodesofservices

GeneralAgreementonTradeinServices(GATS)13134Cross-bordersupply跨境交付Consumptionabroad境外消費(fèi)PresenceofNaturalPersons自然人流動(dòng)

2Commercialpresence商業(yè)存在SupplierConsumer23

41Mode1Cross-bordersupplyExample:TransportTelecommunicationInsuranceFinancialservices(banking)……Mode2ConsumptionabroadExample:TravelStudyingabroadReceivingmedicalservicesabroadMode3CommercialPresenceExample:FinancialservicesConsultingservicesEducationservicesAccommodationservicesConstructionservices……Mode4PresenceofNaturalPersonsExample:Teachingorworkinginothercountries……Ⅲ.AccordingtotheBoundaryofStandards1.GeneraltradesystemRecordingterritorycoincideswitheconomicterritoryofacountryEconomicterritory:consistsofthegeographicalterritoryadministeredbyagovernmentcomprisingcustomswarehouses,alltypesoffreetradezones,andpremisesforinwardprocessing.Nationalterritory:AlltheterritorywithinthenationalboundariesNationalterritory=economicterritorySomeresidentunitspertainingtothenationaleconomy(economicterritory)operateinforeigncountries;Someunitspertainingtoothernationaleconomiesoperatewithinthenationalterritory.NoUSEmbassyinChina2.SpecialtradesystemRecordingterritorycoincideswithcustomsterritoryofacountryCustomsterritory:Thegeographicterritorywithuniformcustomsregulations,suchasatradeblocthathasacustomsunionandauniformordependentterritorybeinggrantedbythesovereigngovernmentsomedegreeofindependenceinforeigntradeandcustomspolicy.Customswarehouses,alltypesoffreezones,andpremisesforinwardprocessingareexcludedfromthestatisticalterritorybythespecialtradesystem.Onlyimportsandexportsofthefreecirculationareaarerecorded.Freeport(eg:HongKong)FreetradeareaBondedwarehouseFreetradezoneCustomswarehouse,freetradezone&freetradeareaCustomswarehouse(bondedwarehouse):

awarehouseinwhichdutiable(goodsarestoredwithoutpayingthedutiesonthem.Iftheimporterdecidestosellthegoodsforre-export,dutieswillnotbeincurred.Iftheimportedgoodsarereleasedforsale,however,customsdutieswillcomedue.Freetradezone:Anareaofacountrywheresomenormaltradebarrierssuchastariffsandquotasareeliminatedandbureaucraticrequirementsareloweredinhopesofattractingnewbusinessandforeigninvestments.Freetradearea:Atypeoftradebloc,adesignatedgroupofcountriesthathaveagreedtoeliminatetariffs,quotasandpreferencesonmost(ifnotall)goodsandservicestradedbetweenthem.Generaltradevs.specialtradeGeneraltrade:Itcoversalltradeflowsincludinggoodsshippedthroughcustomswarehousesandfreetradezones.Specialtrade:Itexcludescertaintradeflows,suchgoodsshippedthroughcustomswarehousesandfreetradezones.Generaltradeandspecialtradediffersmainlyinthewaywarehousedandre-exportedgoodsaretreated.Generaltradefiguresarelargerthanthecorrespondingspecialtradefiguresbecausethelatterexcludecertaintradeflows,suchasgoodsshippedthroughbondedwarehouses.Ⅳ.AccordingtotheRelationshipBetweenProducingCountryandConsumingCountriesHappenswhengoodsaretransporteddirectlyfromtheproducingcountrytotheconsumingcountry.Onlytwopartiesareinvolvedinthetransaction:theexporterandtheimporter.1.DirecttradeOccurswhengoodspassthroughanintermediatecountryotherthantheproducingorconsumingcountry.Threepartiesparticipateinindirecttrade:theexporter,theimporter,andtheintermediateparty/exportagents.2.IndirecttradeImportinggoodstoexportthemtoothercountries.Toputitdifferently,entrepottrademeansimporting(buying)goodsfromonecountrytoexport(selling)themtoanothercountry.Duetogeographical,historical,political,oreconomicfactorsinsomecountries(orregions)Examples:Singapore,HongKong,London,Rotterdam,3.Entrepottrade(re-exporttrade)ReasonsforInternationalTradeⅠ.DifferencesinResourceEndowmentsⅡ.DifferencesinTechnologyⅢ.EconomiesofScaleinProductionⅣ.DiversificationinDemandⅤ.ExistenceofGovernmentPolicies02Ⅰ.DifferencesinResourceEndowmentsUnevendistributionofresourcesleadstointernationaltradeWheat:theUnitedStatesCoffee:Columbia,Brazil,andOil:GulfcountriesⅡ.DifferencesinTechnologyAdvantageoustradecanoccurbetweencountriesifthecountriesdifferintheirtechnologicalabilitiestoproducegoodsandprovideservices.Anationmayhaveaccesstotherawmaterialsthatitneeds,butitmaylacktheabilitytoconvertthosematerialsintothenecessaryconsumerproducts.Examples:emerginganddevelopingnationsⅢ.EconomiesofScaleinProductionTheexistenceofeconomiesofscaleinproductionissufficienttogenerateadvantageoustradebetweentwocountries.Economiesofscalerefertoaproductionprocessinwhichproductioncostsfallasthescaleofproductionrises.Knownas“Increasingreturnstoscale.”Ⅳ.DiversificationinDemandAdvantageoustradecanoccurbetweencountriesifdemandsorpreferencesdifferbetweencountries.Thediversificationofdemandsbetweencountriespromotesinternationaltrade.Example:TherearevariousautomobilebrandsinChina,butsomeChineseconsumersstillfavorbrandsfromGermany,JapanandtheU.S.Ⅴ.ExistenceofGovernmentPoliciesGovernmenttaxandsubsidyprogramscanbesufficienttogenerateadvantagesintheproductionofcertainproducts.Countriescanleveragetradetopromotediplomatic(ratherthanmilitary)solutionstointernationalproblems.Sometimes,politicalobjectivescanoutweigheconomicconsiderationsbetweencountries.DifficultiesandChallengesinInternationalTradeⅠ.LanguageBarriersⅡ.CulturalDifferencesⅢ.CurrencyExchangeandInflationRatesIV.RiskandUncertaintyⅤ.LackofInformationaboutInternationalTradersⅥ.ImportandExportRestrictionsⅦ.StudyofForeignMarketsⅧ.OtherProblems03Ⅰ.LanguageBarriersInternationaltradeparticipantsneedtoadoptaneffectivestrategyforgettingpastthelanguagebarriers.1.Chinese2.English3.Hindi4.Spanish5.ArabicⅡ.CulturalDifferencesEachcountryalsohasitsownspecificcultureorblendofcultures.Cultureconsistsoftheholidays,arts,traditions,foods,andsocialnormsfollowedbyaspecificgroupofpeople.NumerousculturedifferencesUSD/$GBP/?JPY/J￥CAD/C$

EUR/€HKD/HK$CHF/SFCNY/RMB￥(ConfederationHelvetica,海爾維第聯(lián)邦

)

Ⅲ.CurrencyExchangeandInflationRatesEverycountryhasitscurrencyandtherateatwhichonecurrencycanbeexchangedforanother(calledexchangerate)keepsfluctuating.Thechanginginexchangeratecreatesadditionalrisk.MoretimeandexpenseGreaterriskofbaddebtsIV.RiskandUncertaintyInformationonforeigncountriesmaybedifficulttoobtain.

Politicalrisks:war,expropriationorconfiscationoftheimporter’scompany,impositionofanimportbanaftertheshipmentofthegoods,transferrisk(impositionofexchangecontrols,foreigncurrencyshortages),etc.

Economicrisks:insolvencyofthebuyer,protracteddefault,non-acceptance,changingexchangerate,changingstandardsandregulationswithinothercountries.Ⅴ.LackofInformationaboutInternationalTradersNodirectandcloserelationshipbetweenthebuyerandthesellerDifficulttoobtaininformationregardingthecreditworthiness,businessstandingandfinancialpositionofpersonslivinginothercountriesHighlyriskyⅥ.ImportandExportRestrictionsCountrieschargecustomsdutiesonimportstoprotecttheirhomeindustries.Tariffsareputonexportsofrawmaterials.Foreigntradepolicy,procedures,rulesandregulationsdifferfromcountrytocountryandkeepchangingfromtimetotime.Importersandexportersarerequiredtofulfillseveralcustomsformalitiesandrules.Ⅶ.StudyofForeignMarkets&Ⅷ.OtherProblemsEverymarketitsownrequirements,customs,traditions,weightsandmeasures,marketingmethods,etc.Professionaldistributorsandagentscanhelpbuyersandsellersunderstandwhatneedstobedonetosuccessfullyexecutethetransactionwhileavoidingsomeofthepitfallsthatcouldotherwiseoccur.Otherinternaldifficultiesrestrictingimportandexportbusiness:economicunions,nationaleconomicdevelopmentpolicies,proceduraldifficulties,frequentmarketchanges,problemsinpayments,etc.ModesofInternationalTrade04Ⅰ.DistributionⅡ.AgencyⅢ.ConsignmentIV.FairsandSalesⅤ.AuctionⅥ.TenderⅦ.CounterTradeⅠ.Distribution1.DefinitionofdistributionDistributionmeansthatthedistributorallocatesandsellsthegoodsonbehalfoftheexporter.Partiesinvolved:distributors,wholesalersandretailersbesidesmanufacturesDistributorsbuygoodsfromtheprincipalsontheirownaccountandtaketitletothemandresellthemtotheircustomersintheircountry.NocontractualrelationshipbetweentheprincipalandtheultimatecustomersSeparatesetsofcontracts:thosebetweentheprincipalandthedistributor,andthosebetweenthedistributorandtheultimatecustomers.Twokindsofdistributors:(1)Soleorexclusivedistributor:theonlydistributorinacountry(2)Not-exclusivedistributor:severalnon-exclusivedistributorsinonecountryorregion2.FeaturesofdistributionTherelationbetweenthesupplierandthedistributorisPrincipal-to-Principal:thedistributorsellsgoodsinhisownnameandonhisownaccount.3.Contentsofthedistributionagreement(1)Thescopeoftheagreement(2)Theareaofdistribution(3)Quantityandamount(4)Methodsofpricing(5)Otherobligations(6)PeriodofdistributionⅡ.Agency1.DefinitionofAgencyAgencymeansthatoneindividualorlegalentity(theagent)signscontractswithathirdpartyonbehalfofanotherindividualorlegalentity(theprincipal),ordoesothermattersrelatingtothesalesincompliancewiththeinstructionfromhisprincipal,whiletheprincipalshallberesponsiblefortheagent’sbusinessactivitiesandtheobligationsincurredtherein.Example:Onepersongivesauthorizationtoanothertonegotiateacontractonhisorherbehalf.Differenttypesofdealersandagents:(1)Soleagent(exclusiveagent):Theagencyrelationshipendowstheholderexclusiverightstosellaproductorserviceinaparticularterritoryforaspecificperiod.(2)Ordinaryagent:Theordinaryagentisappointedbytheprincipaltoperformcertainactivitiesonbehalfoftheprincipalwithinaspecificareaforaspecificperiod.Andtheprincipalmayappointseveralordinaryagentsinonearea.(3)Generalagent:Ageneralagentactstosomedegreeundertheinstructionsfromhisprincipaltotransactallbusinessofspecifickind,orinaspecificplaceonthebesttermsobtainableandchargesacommissionforhisserviceundersomekindofagreementorcontract.2.FeaturesofAgencyTheagentcan’tsurpassthescopeofauthorityandsignacontractinhisownname.Amiddlemanandreceivescommissions.Freefromtheresponsibilitiesofthecontract.Ⅲ.Consignment1.DefinitionofconsignmentConsignmentmeansthattheexporter(consignor)firstdeliversthegoodstotheplaceofdeliveryinaforeigncountry,thenentruststheagent(consignee)tosellthegoodsaccordingtotheconditionsandmethodsstipulatedintheagreementofconsignment.2.Featuresofconsignment(1)Theconsignorshallfirstdeliverthegoodstotheagentorconsignmentagent.(2)Beforetheconsignmentagentsellsoutthegoods,thetitletothegoodsstillbelongstotheconsignor.(3)Theconsignmentagentwillnottakeanyrisksorpayanyexpensesbutonlychargescommissionsforhisservice.3.Contentsofagreementofconsignment(1)Thepricingmethodsofthegoodsforconsignment(2)Thecommission(3)Thepayment4.Advantagesanddisadvantagesofconsignment(1)AdvantagesIntroducegoodstoaforeignmarket;Enabletheexportertocontroltheforeignmarketpriceofhisproduct;Reducetheirriskandrequirenoadditionalworkingcapital.(2)DisadvantagesTheconsignorundertakelargerisks;Theperiodofcapitalturnoveristoolong;Theexportermayhavetogetthegoodstosellatadiscountifthegoodsdonotsellwellontheforeignmarket.IV.FairsandSales1.DefinitionoffairsandsalesFairsandsalesmeangoodsmeanshowingandsellinggoodsbytakingadvantageofexhibitions,tradefairsandotherformsofgoodsdisplay.2.Featuresandadvantagesoffairsandsales(1)Features:Itisacombinationofexhibitionsandsalesoftheexportcommodities.(2)AdvantagesA.Enlargingpublicityforexportcommodities,developingthepotentialbuyers,andpromotingthetrade;B.Establishinganddevelopingcustomerrelations,andexpandingsale;C.Conductingmarketresearch,gettingfeedbacksfromcustomers,andenhancingtheexportcompetitiveness.3.Modesoffairsandsales(1)Internationalfairs:includecomprehensiveinternationalfairsandprofessionalinternationalfairs;(2)ChinaImportandExportFair:heldtwiceayearinspringandautumnrespectively(3)Fairsandsalesheldabroad:includefairsheldbydomesticbusinessmenaswellasfairsandsalesheldbysupportingforeignbusinessmenorheldjointlywithforeignbusinessmen.4.Problemsoffairsandsales(1)Propercommodities(2)Goodpartner(3)Properplace(4)GoodopportunityⅤ.Auction1.DefinitionofauctionWhenacertainitemissoldinpublicthroughcompetitivebiddingbythebuyers,itisknownasanauction.Anauctioneerisapersonwhoconductstheentireprocessonbehalfoftheseller.Auctionprofessionalssuggestthekindofauctionsuitableforaparticularitemsothatmaximumprofitcanbederivedoutofit.Participantsinanauctionmayormaynotknowtheidentitiesoractionsofotherparticipants.Biddersmayparticipateinpersonorremotelythroughavarietyofmeans,includingtelephoneandtheinternet.Thesellerusuallypaysacommissiontotheauctioneerorauctioncompanybasedonapercentageofthefinalsellingprice.2.Typesofauctions1324ThemostcommonformParticipantsbidopenlyagainstoneanother,witheachsubsequentbidhigherthanthepreviousbid.Theauctionendswhennoparticipantiswillingtobidfurther,atwhichpointthehighestbidderpaystheirbid.Englishauction

(openascendingpriceauction)Allbidderssimultaneouslysubmitsealedbidssothatnobidderknowsthebidofanyotherparticipant.Thehighestbidderpaysthepricetheysubmitted.Beingcommonlyusedintendering,particularlyforgovernmentcontractsandauctionsforminingleases.Sealedfirst-priceauction(first-pricesealed-bidauction,FPSB)NotwidelyusedTheauctioneerbeginswithahighaskingpricewhichislowereduntilparticipantsarewillingtoaccepttheauctioneer’sprice.Thewinningparticipantpaysthelastannouncedprice.BeingusedfortheDutchtulipauctions,flowersalesandperishablecommodities,suchasfishandtobacco.Dutchauction(opendescendingpriceauction)RarelyusedinpracticeItisidenticaltothesealedfirst-priceauctionexceptthatthewinningbidderpaysthesecondhighestbidratherthantheirown.ItisverysimilartotheproxybiddingsystemusedbyeBay,wherethewinnerpaysthesecondhighestbidplusabiddingincrement(e.g.,10%).4)Vickreyauction

(sealed-bidsecond-priceauction)3.ProcedureofauctionPreparationinspectionbythebuyerformalauctionconcludingatransactionandtakingdeliveryofthegoodsmakingpayment4.Featuresofauction(1)Itisprocessedinanorganization.(2)Ithasitsparticularlawsandregulations.(3)Itisthespottransaction.Ⅵ.Tender1.DefinitionoftenderTenderortenderingistheprocessofbiddingforworkorcontracts,inwhichbuyersseekthebestpriceorvalueformoneyfromaselectionofprospectivesuppliers.Itiscommonlyusedintheprocurementofgoods,exploration,miningandprocurementofworks,etc.2.Typesoftenders(1)Opentender:themaintenderingprocedureemployedbybothgovernmentandprivatesectorsAllowinganyonetosubmitatender,offeringanequalopportunitytoanyorganization,providingthegreatestcompetitionamongsuppliersandcreatingopportunitiesforneworemergingsuppliersMoretimeisrequiredtoevaluatethetenders(2)Selectivetender:onlyallowingsupplierstosubmittendersbyinvitationBeparticularlyappropriateforspecialistorcomplexcontracts,orcontractswherethereareonlyafewsuitablefirmsCanexcludesmallersuppliersorthosetryingtoestablishthemselvesinanewmarket(3)Negotiatedtender:extensivelyusedintheengineeringandconstructionindustryBeappropriateforhighlyspecializedcontractswithlimitednumberofpotentialsuppliersorforextendingthescopeofanexistingcontractCanreducethedurationandcostsoftenderingandallowearlysupplierinvolvement3.Processesoftendering(1)Invitationtotender(2)Submissionoftender(3)Bidopen(4)Evaluationoftender(5)Tenderdiscussionsandtenderdecisions(6)Establishmentofacontract(7)ExecutionofacontractⅦ.CounterTrade1.DefinitionofCounterTradeCountertradeisthereciprocaltradeinwhichgoodsorservicesareexchangednotforcashbutothergoodsorservices.Alargepartofinternetcommercecomprisesnationalandinternationalcounter-trade.2.FormsofCounterTrade(1)Bartertrade:involvingatwo-wayexchangeofspecifiedgoods(2)Compensationtrade(countertrade,reciprocaltrade,offset,orcounterpurchase):directcompensationtrade(buy-back)andindirectcompensationtrade(counterpurchase)(3)Counterpurchase:one-directiontransaction(4)Switchtrade:exportingandimportingthroughathirdnation(5)Offsettrade:Theexportcountryagreestousecertaingoodsorservicesfromtheimportcountryintheprocessofproduction.Itmaybedirectorindirect.ReviewQuestions05Whatarethedifferencesbetweendirecttradeandindirecttrade?Whatarethefourtypesoftradeinservice?Whatarethedifferencesbetweenthegeneraltradesystemandthespecialtradesystem?Whatarethereasonsforinternationaltradeconsideringeconomicbenefits?Whyistheremorecomplexityininternationaltradethandomestic?Whatformsofagencyarecommonlyusedininternationaltrade?Whataretheadvantagesanddisadvantagesofconsignment?Whatarethemainformsofcountertrade?ChapterTwo

MajorInternationalTradeTheoriesCONTENTS05ModernTradeTheories04NeoclassicalTradeTheories03

ClassicalTradeTheories02

Mercantilism01KeyPoints06ReviewQuestionsKeyPointsMainideasofthetradetheoriesAbsoluteAdvantage&ComparativeAdvantageHeckscher-OhlinTheoryProductLifeCycleTheoryMercantilism01DevelopedinthesixteenthcenturyOneoftheearliesteffortstodevelopaneconomictheoryThistheorystatedthatacountry’swealthwasdeterminedbytheamountofitsgoldandsilverholdings,andmercantilistsbelievedthatacountryshouldincreaseitsholdingsofgoldandsilverbypromotingexportsanddiscouragingimports.Themercantilistsrecommendedpoliciestomaximizeexportsandminimizeimportsandadvocatedthatthegovernmentshouldlimitimportsbytariffsandquotaswhilesubsidizingexports.Theflawwithmercantilismwasthatitviewedtradeasazero-sumgame.Azero-sumgameisoneinwhichagainbyonecountryresultsinalossbyanother.Apositive-sumgameisoneinwhichthetotalofgainsandlossesisgreaterthanzero.ClassicalTradeTheoriesⅠ.TheTheoryofAbsoluteAdvantageⅡ.TheTheoryofComparativeAdvantage02Ⅰ.TheTheoryofAbsoluteAdvantageAdamSmithpublishedTheWealthofNations（《國(guó)富論》）in1776inLondon.Adam’stwomainareasofcontribution:absoluteadvantageandthedivisionoflaborAbsoluteadvantagemeanstheabilityofanindividual,acompany,aregion,oracountrytoproduceagreaterquantityofacommoditywiththesamequantityofinputsperunitoftime,ortoproducethesamequantityofacommodityperunitoftimeusingalesserquantityofinputsthananotherentitythatproducesthesamecommodity.Anexampleoftwocountriesandtwocommodities(2×2model)

CountryA(Labourhoursrequiredtoproduceoneunitof)CountryB(Labourhoursrequiredtoproduceoneunitof)

Commodity150100Commodity212060Absoluteadvantage?Exchangeratio?CountryA:

Commodity1CountryB:

Commodity21Commodity1:6/5Commodity21Commodity2:5/6Commodity1CountryAwouldspecializecompletelyintheproductionofCommodity1andCountryBintheproductionofCommodity2.II.TheTheoryofComparativeAdvantage

IntroducedbyDavidRicardoinhisworkOnthePrinciplesofPoliticalEconomyandTaxation

in1817Comparativeadvantagemeanstheabilityofaneconomytoproduceaparticularcommodityatarelativelylowercostthanitstradingpartners,whichgivesacompanytheabilitytosellcommoditiesatalowerpricethanitscompetitors.Comparativeadvantagefocusesontherelativeproductivitydifferences,whereasabsoluteadvantagelooksatabsoluteproductivity.

ExampleLaborrequirementsandabsoluteadvantageinBritainandPortugal(perunit)(2×2model)WineClothPriceratioinautarkyPortugal80

hrs.90hrs.Britain120hrs.100hrs.1W:8/9C1C:9/8W1W:6/5C1C:5/6WWhichcountryhasanabsoluteadvantage

inwhatgood(s)?Portugal:

Both.Whichcountryhasacomparativeadvantageinwhatgood?Portugal:Wine.Britain:Cloth.Ricardo’stheoryholds:Acountrymayhavenoabsoluteadvantageinallproducts.However,itsurelyhasacomparativeadvantageinaparticularproduct.Acountrycanbenefitfromexportifonlyithasacomparativeadvantageintheproductionoftheexportingproduct.Anycountrywillhaveaproducttoexportandgainfrominternationaltrade.Ricardo’stheorysuggeststhatconsumersinallnationscanconsumemoreiftherearenorestrictio