This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Modern T rade Theories In the 20 th century, a number of modern trade theories emerged. These theories take a more realistic view of the major drivers of international trade and attempt to avoid some of the oversimplifications of the classic theories. Three modern trade theories that we will discuss are the product life cycle, strategic trade, and national competitive advantage. Product Life Cycle Classical trade theories suggested that a country’s comparative advantage should not change over time. For example, if England had a competitive advantage in the production of textiles 200 years ago, it should have the same comparative advantage today, absent a major change in the weather or the fertility of the English soil. In fact, England has lost its comparative advantage in textile production—a phenomenon that the classical theories cannot explain. Developed by American economist Ray Vernon in the mid- 1960s, product life cycle theory suggests that a nation’s comparative advantage will change over time, because products progress through a typical life cycle. Vernon divided the world into three groups of countries: the...
View Full Document
This note was uploaded on 02/06/2011 for the course GEB 3373 taught by Professor Crum during the Spring '10 term at University of Florida.
- Spring '10