International Trade Comparative And Competitive Advantage

International trade theories are simply theories that explain how imports and exports work between different countries. Hence the name international trade. In this paper I will be reviewing different theories of international trade, explain the difference between comparative and competitive advantages, and answering three important questions. What the underlying economic rationale for international business activity is, why trade takes place, and the gains from trade and investment. I will first start off by going over the two different types of advantages in international trade: comparative and competitive advantage. Comparative advantage is the features that a country can provide mainly for the benefits of global competition. This advantage comes from the county’s natural resources, labor, climate, arable land, and much more. To clarify, it is the ability to carry out economic activity such as making a specific product more efficiently. Competitive advantage is simply an ass et that is difficult for competitors to imitate making this a huge benefit for firms to succeed in a foreign market. These advantages come in multiple forms of specific knowledge, capabilities, superior strategy, and relationships. Competitive advantage is a firm’s specific advantage that can put a company in a superior position. Since international trade is such a broad topic and has been around for so long, there are bound to be multiple theories that try to explain how it all began. TheseShow MoreRelatedInternational Trade And The Global Marketplace1428 Words   |  6 Pagescountries are engaged to international trade in order to achieve economic growth, free trade agreement and financial liberalization has contributed to the opening up of world economies and resulted in more international trade. Countries use their comparative advantages to gain a positon in the global marketplace and achieve economic growth (Seyoum 2007). 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