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International Trade International trade is the exchange of goods and services between countries. An import is a Countries purchase of a good or service made overseas. An export is the sale of a product which has been produced in a country overseas. Reason for international trade: A nation trades because it lacks the raw materials, climate, specialist labour, capital or technology needed to manufacture a particular good. Trade allows a greater variety of goods and services. Theories of International trade Comparative Advantage Comparative advantage exists when a country has a margin of superiority in the production of a good or service i.e. where the opportunity cost of production is lower. The basic theory of comparative advantage was developed by David Ricardo Ricardo's theory of comparative advantage was further developed by Heckscher, Ohlin and Samuelson who argued that countries have different factor endowments of labour, land and capital inputs. Countries will specialise in and export those...

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