Wednesday, October 9, 2019
International Trade and Globalization Essay Example | Topics and Well Written Essays - 3500 words - 1
International Trade and Globalization - Essay Example The paper will analyze the globalization of international business, for instance, in regard to market entry techniques and the importance of multi-national global brands and corporations, from different perspectives. Comparative advantage determines international trade. Theory of comparative advantage argues that the common rate of profit and the standard of wages are not at equilibrium internationally as they are in a domestic market. The assumption of comparative advantage theory is that capital cannot be moved from less profitable to more profitable sectors of production. If this is the case, it would lead to an equalization of the profits rates like in the domestic market. Consequently, the wage rates are not equalized in the international market due to lack of labor movement. A nation is said to be at a comparative advantage in the production of commodities if the opportunity cost of generating the product is lower compared to other countries. The comparative advantage theory is concerned with a trade of homogeneous products. On the other hand, new trade theory focuses on intra-industry and inter-industry trade. Intra-industry trade is the exchange of similar products within a common industry for example goods at various levels of production. Intra-industry trade is the exchange of similar products within a common industry for example goods at various levels of production. Inter-industry trade is the exchange of goods from various industries, for instance, trading agricultural products for equipment and machinery.