Introduction to International Trade

Globalization is not a recent phenomenon. The information shows that the world economy was just as globalized 100 years ago as it is today. As a result of widespread mercantilism since 16^th and 17^th centuries, the world trade also expanded in the world through business firms of Western Empires. For instance, South East Indian Firm was the leading commercial company handling trade and business between Western Europe and South East Asian countries. Along with the development of mercantilism and capitalism theory of International Trade also developed in Western Europe by famous classical economists such as Adam Smith and David Ricardo in 18^th and 19^th centuries. But the situation of world trade in today is far more advanced and deeply integrated than early time due to rapid expansion of modern electronic communication. Thus the present globalization process is not merely depend on trade, it connected with international capital and labor mobilization through foreign direct investment and labor immigration, and diffusion of technology throughout the world. Agricultural globalization also becomes a part of economic globalization as a means of internalization of agriculture along with factors of trade, investment, factor mobility and technological advancement.  

                 

As good as expansion of international trade, technology and investment, literature of the international trade and globalization were also enriched with sound theoretical base and conceptual models. Thus, economic thoughts of International Trade were evolved as classical, neoclassical and modern trade theories. The classical theory of international theory is based on views of Adam Smith (1776) and David Ricardo (1817) presented on the principles of absolute advantage and comparative advantage of trade. Neoclassical thoughts are mainly based on views of Alfred Marshall, Jacob Winer, Godfriy Haberler, Leontief and James E. Mead on increasing opportunity cost, Social indifference curve and offer curves. The views of Heckscher and Ohlin on factor Endowment theory and Paul A. Samuelson’s modification of Heckscher- Ohlin theory is considered as modern theory of International Trade. In Addition, the recent development of trade theories and models could be discussed under two schools of thoughts such as alternative trade theories and exogenous and endogenous growth models. Technical Gap theory (Posner, Gruber and Vernon, 1961), Product Life Cycle Theory (Raymond Vernon, 1966), Overlap Demand Theory (S.B. Linder, 1961), Intra-Industry Trade Theory (H. G. Grubell et al, 1975) Competitive advantage theory (M. E. Porter, 1990) and Strategic Trade theory (Paul Krugman, 2000) could be regarded as alternative modern trade theories. Thoughts of exogenous and endogenous growth models are mainly based on Solow neo classical growth model and externalities models of technical progress, learning by exporting and Research and Development models.        

Likewise, owing to international trade, investment and technology development, agriculture also evolved from traditional subsistence agriculture to modern commercialized agriculture during past few decades as a dynamic device for fast and sustainable development. Thus the main focus of the literature review on agricultural globalization would address theoretical base of international trade, investment, labor, technology and its impact on modern agriculture.    

However, despite the protectionism that practiced many countries for the prosperity of domestic industries, theoretical base of economic globalization shows that the majority of economists were in favor of free international trade over protected trade. From the beginning of Adam Smith, David Ricardo in the eighteenth and nineteenth centuries, economists have developed very sound arguments to prove that international trade is very effective to improve growth and human welfare. Trade permits economies to specialize in producing goods and services according to the comparative and competitive advantage of the respective country. Basically theoretical models of globalization could categorize under five characteristics such as trade, capital movements, labor movements and spread of knowledge and technology. Though the nature of this categorization is somewhat subjective, it reflects main features of globalization i.e. international trade, international investment international immigration and technology.