This chapter begins by giving a brief overview of the benefits of international trade through the examination of the garment industry in Bangladesh. This chapter has also evaluated several theories that outline the advantages of a country engaging in international trade and the model of international trade experience in the world market. These theories comprise the theories of Heckscher-Ohlin, comparative advantage, Ricardo, Porter’s, Product life cycle, Smith, and new trade (Hill, 2010).
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On the contrary, the mercantilist principle, and to some level, the new trade standard has advocated the need for government involvement in encouraging exports through grants and restraining imports through quotas and import taxes. Even though there is no clarity about the pattern of international trade, the product life cycle theory, the comparative advantage theory, Porter’s theory, and the Heckscher-Ohlin theory have recommended significant factors for the pattern.
The role of managers significantly influences international trade, and the government’s role is the major focus in this chapter, where the author employed various types of hypotheses to illustrate how government policies and trade agreements influence international trade. The hypothesis of absolute benefit proposes that nations have different capabilities in producing goods and that a country ought to focus on production in areas where it enjoys a supreme advantage (Hill, 2010).
The model of international trade is dictated by disparities in resource endowments. Moreover, trade enables a country to specialize in the manufacturing of products, gain economies of scale, and reduce the expenses of production. The chapter concludes by outlining the benefits of international trade, businesses, and governments promoting or restricting free trade and providing the Ecuadorean rose industry as a case example (Hill, 2010).
I have learned about several important facts about free trade and its implications on international firms, especially regarding their location and policy repercussions. The knowledge of international trade has also boosted my understanding of the value of trade and why diverse nations have benefited in diverse generative activities compared to other nations (Hill, 2010). Another essential lesson to learn is the importance of a firm to spread out its activities of manufacturing to nations where those activities can be executed most proficiently and in line with international trade practices.
Moreover, I learned of the rationale of many firms spending significant amounts of monetary resources in constructing a first-mover even though that entails heavy losses before the new enterprise grows to be gainful. International trade practices improved my awareness and understanding of the government’s responsibility in enhancing nationwide competitive advantage in specific industries (Hill, 2010). International trade theory further enables an individual to understand some of the business policies and trade agreements adopted by various countries’ governments concerning international trade.
Additionally, the various case studies analyzed in this chapter, such as the Bangladesh garment industry and the Ecuadorean rose industry, provided me with a good background to evaluate the pattern of international trade and its benefits to various countries (Hill, 2010). Finally, the information contained in the chapter has enabled me to understand the implications, benefits, and limitations of free international trade, especially after analyzing the various informative theories and well-selected case examples provided. This knowledge has enabled me to answer the primary international trade question of why countries trade with each other and explain trade flows between countries (Hill, 2010).
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Hill, C. W. (2010). International Business (8th ed.). New York: McGraw-Hill.