Non-state Educational Institution
Chelyabinsk Institute of Economics and Law
after M.V. Ladoshin
Faculty of Management, Finance and Law
THE THEORETICAL BASIS FOR THE INTERNATIONAL TRADE. THE MODERN TRENDS OF THE INTERNATIONAL TRADE DEVELOPMENT
Performed by: Kichutkina N. N.
Checked by: Salyakhova G. Kh.
The traditional and most advanced form of the international economic relations is the foreign trade. On a share of trade it is necessary about 80 % of all volume of the international economic relations.
Theories of the international trade beginning from the English classical political economy, have passed a number of stages together with the development of the world economic science.
The chosen theme is actual as theories of the international trade benefit since they help to explain what competitive production it is possible to make in a particular country or region, where the company can organize effective manufacture of given products and whether the state will interfere with barter between the countries.
The basic purpose of this term paper is studying both theories revealing the principles of optimum participation of national economies in the international barter, and objective laws of development of the world trade, including Russia’s foreign trade.
The primary goals of this term paper are:
1. To consider what international specialization is the most effective and beneficial for the separate countries and regions.
2. To define the basic directions of commodity streams between the countries and factors of competitiveness of separate countries in the world market;
3. To analyse the role of Russia in the world trade.
Area of research of the international economic relations is theoretical problems of organizing foreing trade in Russia and abroad. Object of research is the external world.
The theoretical and methodological basis of the term paper are the of founders of the economic science, modern domestic and foreign scientists. However this theme is widely discussed in the periodic economic editions, such as « the Russian External Economic Bulletin », "Expert".
The practical importance of the term paper is s that its results can be used in the educational process while studying economic disciplines.
The term paper consists of the introduction, three chapters, the conclusion and the list of the literature. In the introduction the urgency of the chosen theme is proved, the purpose, problems, area and object of the research is defined, scientific novelty, theoretical and practical values of work are considered.
In chapterI « Theories of the international trade » classical and modern theories of the world trade are considered; in chapter II the concept of the world trade, and also the law of development of the international trade and the basic directions of the foreign trade streams between the countries; in chapter III the role of Russia in the international trade has been analysed. In the conclusion of the term paper the basic results of the carried out researches are stated, conclusions and practical recommendations are made.
Active participation of the countries in the foreign trade allows them to use resources available in the country more effectively, to join the world achievements of science and technology.
Chapter I. Theories of the international trade
1.1 Classical theories of the international trade
A.Smith’s Principle of absolute advantage
The policy of free-trade has been developed by English economist A.Smith. He has created the new theory of the world trade. Не considered, that it is necessary to import the goods from the country where costs absolutely it is less, and to export that goods, which costs below exporters.
A.Smith's approach has received the name « the Principle of absolute advantage ».
Each country should specialize on manufacture of the goods which average costs it is less, than average costs in other countries.
Smith has proved, that free trade will be favourable to its all participants.
If a country makes some goods more on a unit of cost than its competitors do, it has the absolute advantage in manufacturing these goods. It is favourable for the country– manufacturer to export these goods, and it is favourable for other countries to buy them since it would be more expensive to produce them.
D.Rikardo’s Principle of comparative advantage
D.Rikardo has formulated the theory of comparative costs.
He has defined a price zone inside of which the exchange will be favourable to everyone. D.Rikardo has shown, that the international exchange is possible and desirable in interests of all countries.
An economic theory which claims that all countries will be better off if each of them concentrates on doing the things it does best.
So, most countries have one thing they do better than anyone else. By concentrating on one activity they can import the things they produce less well.
Foreign trade should be free.
Theory of Hecksher - Olin
The new model has been created by the Swedish economists Ales Hecksher and Bertel Olin.
Theory has received the name of the theory of proportional factors .
The countries aspire to export that goods in which production they have superfluous factors of manufacture. And to import the goods in which scarce factors for the country are used.
They considered, that it is possible to induce the countries to development of manufacture and export of that production where superfluous and cheap factors of manufacture are used.
Vasily Leontiev an American economist. He investigated structure of export and import of the USA.
He has found out, that in export трудовоепотребление goods prevailed, and in import prevailed capital-intensive. The theory has received the name «Leontiev’s paradox ».
V. Leontiev has assumed, that greater productivity of the American work is connected with higher qualification of the American workers.
So, V. Leontiev has found out, that the branches being successful exporters, possess higher labour input. And other branches colliding with a competition of the import goods, not so are successful.
1.2 Modern theories of the international trade
The theory of the technological break
The theory of the technological break is the modern theory of the world trade. The theory was developed by the American economists G.Hafbauer, R.Vernon.
If in branch technological innovations are applied, country will receive comparative advantages. If the country makes the goods with smaller costs, it will receive additional profit in the world market. Therefore exporters are interested in increase in manufacture of the given goods and its realization in the world market. While break exists, it renders positive influence on export of goods in which manufacture new technologies are used.
The theory of the product life cycle
R.Vernon, C.Kindelberger, L.Uels have developed the theory of the product life cycle. This theory explains development of the world trade by finished goods on the basis of stages of its life in the market.
Development of the world trade by finished articles depends on stages of a life.
The product life cycle is a familiar one in marketing. A product is launched, developed, goes through a period of growth, enters maturity, declines, and eventually dies.
At the first stage there is a development of new production. Manufacture of a new product has small-scale character, demands high qualification of workers and concentrates in the country of an innovation.
At the second stage of growth demand for a product grows also its manufacture extends. The product becomes more standardized, the competition between manufacturers increases and export extends.
The large-lot production is typical of a maturity. The product life cycle passes in a stage of decline, demand is reduced.
The theory of the product life cycle is realistic enough reflects evolution of many branches. However is not a universal explanation of tendencies of development of the international trade .
Michael Porter’s the theory of competitive advantage
In 2-nd half XX centuries in the world trade have occured changes. In commodity structure of the world trade, sale of finished goods began to prevail. In 1990 the American economist M.Porter has published research « Competitive advantages of the countries ».
M.Porter has created the original theory of competitive advantage of the country. The central place in his concept is occupied with idea of a national rhombus.
Determinants of competitive advantage is characteristics of the most significant sources of competitive advantage of the companies of processing industries.
1. The Factor of a condition
2. Conditions of the internal demand, causing a scale effect
3. Presence of adjacent and supporting branches
Thus, the theory of a competition connects inclusion of the country and separate firm in the world trade with conditions of a competition.
The Theory of a scale effect
P.Krjugman, R.Drize, G.Hafbauer have developed the theory of a scale effect.
At the certain technology and the organization of manufacture long-term average costs are reduced in process of increase in output, i.e. there is an economy caused by mass production.
The effect of mass production was realized, necessary capacious enough market. International trade allows to expand commodity markets. It is offered to consumers to more production and lower prices.
The theory of a scale effect is not universal.
So, nowadays the advantages in the competition are determined neither by the size of the country, nor by rich natural resources or by the power of the financial capital. The determinatives are the educational level and volume of the knowledge accumulated by a society.
Chapter II. The international trade at the present stage of development
2.1 Concept and laws of development of the international trade
Basis of economic relations in the world economy is international trade.
International trade is sphere of the international commodity and monetary relations on an exchange of products of work (the goods and services) between sellers and buyers of the different countries».
International trade includes export and import of the goods. Trading balance is parity between export and import
The structural shifts occuring in economy of the countries under influence of a scientific and technological revolution, specialization and cooperation of industrial production, strengthen interaction of national economy.
It promotes activization of the international trade. International trade grows faster production. Foreign trade became the powerful factor of economic growth.
International trade influences economy of each country.
International trade is mutually advantageous, as conducts to specialization and an exchange. Benefit is taken from a difference in costs in the different countries. It allows to receive economy from scale.
International trade is characterized by three basic parameters are : commodity circulation, commodity structure and geographical structure.
The term "foreign trade" is understood as trade between the countries, consisting of export and import of the goods and services.
Kinds of the foreign trade are:
1. sale of finished goods;
2. sale of machines and the equipment;
3. sale of raw material;
4. sale of services.
The parameters reflecting participation of the country in the international trade, are quota of export and of import.
Participation of the country in the international trade is caused by a level of its economic development, the sizes of territory, a population, problems and the purposes of economic policy.
Law of the world trade development
World trade grows very quickly. Export shares of the countries increase. Densities of ready industrial, high technology production grows. The export prices of machines and the equipment quickly grow.
For an estimation of advantage of the international trade for the country, economists use an index of conditions of trade.
The important tendency in the international exchange is the increase in the world market of services, especially tourist, transport, financial. Leaders of this market are the advanced countries.
2.2 Structure and the basic commodity streams of the international trade at the present stage of development
Considering structure of the world trade in the beginning of XXI century, it is possible to see essential changes. The share of the trade of a manufacturing industry has increased with 1/3 up to 3/4, on the foodstuffs and raw material it is necessary about 1/5 commodity circulations. More than 40 % of all modern world export are machines and the equipment.
The commodity structure of the world trade changes under influence of a scientific and technological revolution, a deepening of the international division of labour. Now the share of such kinds of production, as production of a manufacturing industry, machines, the equipment, chemical production, the high technology goods especially quickly grows.
One of quickly developing spheres of the international trade is trade in chemical production.
Consumption of raw material and power resources has increased. However rates of growth of trade in raw material noticeably lag behind the general rates of growth of the world trade.
Active trade in machines and the equipment has generated a number of new services, such as engineering, leasing, consulting, information services.
Export of the electrotechnical and electronic equipment quickly grows. On its share it is necessary more than 25 % of all export of machine-technical production.
The commodity structure of the international trade testifies to a level of economic development of the state.
In 2005, according to WTO, there was a growth of the international commodity circulation more than on 13 % at cost up to a level of 10,4 bln. dollars.
The important role in commodity structure of the world trade is played oil and other fuel goods. The share of fuel raw material has increased up to 16 %. For example, Norway is the third in the world the exporter of oil and gas. The Incorporated Arab Emirates the fourth in the world exporters of oil and gas.
The basic share in the international trade in the goods is occupied with the advanced countries with market economy. The leader of the world trade by the goods are the USA, on 2-nd place the Germany, on 3-rd place the Japan.
The leading countries – exporters of the world are : 1 place - Germany (10 % of the world export); 2 place - USA (9,7 %) and further places are distributed as follows: Japan (6,3 %); China (5,9 %); France, the Great Britain (4,1 %); Netherlands (3,9 %); on 11-th place Hong Kong, and Russia on 17-th place (1,8 %).
The leading countries – importers are: the USA - 16,8 % (1 place); Germany – 7,7 % (2); the Great Britain – 5,3 % (3); Japan – 4,9 % (7); and Russia in the given list occupies 23 place – 1 %.
According to WTO, the largest manufacturer, the exporter and the importer of an industrial output remains the USA. On their share 14 % of the world export and 19 % of import are necessary. The USA is the world's largest pure importer of production of mechanical engineering.
The tendency of the international trade is the increase in volumes of trade between less developed countries.
The share of the countries of the Western Europe in the world export made 32 %. On EU 85 % of export and 77 % of import of the industrial goods are necessary.
The beginning of XXI century was characterized by significant shifts in the external economic sphere of Spain. In 2004 on its share was necessary 4,1 % of the world trade, including 1,9 % on export and 2,2 % on import.
The commodity structure of the Russian export to last years keeps the raw orientation. Dominating positions occupy the fuel and energy goods, black and nonferrous metals and chemical fertilizers.
It is necessary to note, that on structure of the international trade the greatest influence render a scientific and technological revolution, a deepening of the international division of labour. In the world trade growth of chemical production, a manufacturing industry, a machine engineering industry, power resources is observed, that is the precondition for development of new services.