THEORIS OF INTERNATIONAL BUSINESSInternational trade is the purchase, sale or exchange of goods and services across national border.International trade produces many benefits to countries both exporting and importing products.For countries importing products, the benefits are that they get goods or services they cannotproduce enough of on their own. Likewise, for the exporter, one of the benefits is though thetrade they can also get either the goods or services they need or the money in which to purchasethese goods from another country or source. International trade also helps the economic of thecountries.International trade encompasses many aspects in relation to various countries. There are manytheories regarding international trade. Some of these include mercantilism, absolute advantage,comparative advantage, factor proportions theory, international product life cycle, new tradetheory and national competitive advantage. DEFINITION OF MERCANTILISMMercantilism is an economic theory and practicecommon in Europe from the 16th to the 18th centurythat promoted governmental regulation of a nation’seconomy for the purpose of augmenting state power atthe expense of rival national powers. In particular, itdemands a positive balance of trade. It was theeconomic counterpart of political absolutism.The main goal was to increase a nation's wealth byimposing government regulation concerning all of theMecansmAbsoluteAdvantageComparativeAdvntageHeckschr–OhlinTheoryPrteDamonThory
nation's commercial interests. It was believed that national strength could be maximized bylimiting imports via tariffs and maximizing exports.Mercantilism was a cause of frequent European wars in that time and motivated colonialexpansion.ORIGIN OF MERCANTALISMMost of the European economists who wrote between 1500 and 1750 are today generallyconsidered mercantilists; originally the Standard English term was "mercantile system". Englishmerchant Thomas Mun (1571–1641) as a major creator of the mercantile system, especially forhis Treasure by Foreign Trade (1664) and Perhaps the last major mercantilist work was JamesSteuart’s Principles of Political Economy published in 1767.POLICIES OF MERCANTILISMHigh tariffs, especially on manufactured goods, are an almost universal feature of mercantilistpolicy. Other policies have included:•Building a network of overseas colonies;•Forbidding colonies to trade with other nations;•Banning the export of gold and silver, even for payments;•Forbidding trade to be carried in foreign ships;•Export subsidies;•Promoting manufacturing with research or direct subsidies;•Maximizing the use of domestic resources;•Restricting domestic consumption with non-tariff barriers to trade.