ႏိုင္ငံတကာ စီးပြားေရး တြင္ မသိမျဖစ္ သိထားရမည္. ဆရာၾကီးမ်ား ႏွင့္ သူတို. ေပၚလစီမ်ား 
Adam Smith confirmed that international trade is not a zero-sum game which is previously stated by David Hume but it is a positive sum game and both can gain from trade. According to Adam Smith, trade between any two nations is based on the absolute advantage which is the ability of a country to produce a good using fewer resources than another country. The idea of positive sum game reduces many trade controls that characterized the Mercantilist period concerning the international trade.
Adam Smith concluded that countries should specialize in and export the commodities in which they had an absolute advantage and import those commodities in which their trading partners had an absolute advantage.
If a country, A, could produce a commodity, X, with the absolute labor required per unit of output less than that of another country, B; then the country A had an absolute advantage in producing product X.
Absolute Advantage
(per man-hour)
Country Cloth (yards) Rice (tons)
A 4 1
B 3 2
Country A is more sufficient and has absolute advantage in producing cloth, while country B is more sufficient and has absolute advantage in producing rice.
Adam Smith also acknowledged that certain advantages could be acquired through the accumulation, transfer and adaptation of skills and technology.
The second one that Adam Smith contributes to international trade is that it is productive capacity that boosts a nation’s wealth and enlarging the production of goods and services, not on its holdings of precious metals. According to Adam Smith, growth in productive capacity was fostered best in an environment where people were free to pursue their own interest.
Self-interest would lead to individuals to specialize in producing goods and services and to exchange them based on their own special abilities. That would generate productivity gains through the increased division and specialization of labor.
Another one Adam Smith contributes to international trade theories is that he saw little need for the government control of the economy which is a government policy laissez faire that would best provide the environment for increasing a nation’s wealth. The proper role of the government was to see that there was no barrier to international trade. Adam Smith is honored as the father of modern economics for his great contributions.
The second person after Adam Smith is David Ricardo who expanded upon Smith’s concepts and demonstrated that the potential gains from trade were far greater than Adam Smith had envisioned in his concept of absolute advantage. The work of Ricardo, the Principles of Political Economy and Taxation 1817, stressed that the potential gains from trade were not confined only to absolute advantage. In his book, he presented the law of comparative advantage which is the ability of a country to produce a good at a lower opportunity cost than another country.
Comparative Advantage
Ricardian production conditions in country A and B
Country Cloth(yards) Rice (tons) (per man-hour)
A 80 90
B 120 100
Price ration in autarky:
Country A 1R = 8/9 C or 1C = 9/8 R
Country B 1R = 6/5 C or 1C = 5/6 R
Thus, Country A has comparative advantage in producing rice and country B has comparative advantage in producing cloth.
According to Adam Smith, if there are not absolute advantages between countries, then there will be no trade. However, David Ricardo proved that countries do not need to have absolute advantage but if they have comparative advantage, they can trade and they can both gain from trade.
However, David Ricardo did not examine the precise determinations of the international price ratio or terms of trade. However, the important point is that, after trade there will be a common price of a commodity in terms of another in the two countries.
The third one who contributed to international trade is Gotfried Haberler who invented terms of trade or international price ratio. Gotfried Haberler , in 1936, used the opportunity cost which is best alternative forgone to explain the theory of comparative advantage by using the productive possibility curve (PPC).
The assumptions for PPC are 1) an economy has fixed resources endowment, 2) resources have alternative uses, 3) resources are used at full employment and full production and 4) the present state of technology.
A PPC shows all the combination of maximum outputs of two goods that the economy can produce with full employment and full production of resources. The slope of a PPC is called the marginal rate of transformation (MRT). Since resources are constant, on the PPC, product y must be scarified to the increase of x, thus, PPC is a downward sloping curve. MRT of x and y indicates the opportunity cost of producing x in terms of y and vice versa.
After Gotfried Haberler, two Swedish economists, Eli Heckscher and Bertil Ohlin, again developed the theory of trade pattern called the Heckscher-Ohlin Theorem early in the 20th century. They looked at different resources at other countries. The assumptions of the Heckscher-Ohlin Theorem are
1) there are two countries: A and B
2) there are two commodities: rice (r ) and car (c ),
3) there are two inputs: labor (l) and capital (k),
4) technology of production is the same in both nations,
5) commodities are produced under constant r returns to scale, and
6) full employment,
7) rice is labor intensive, but car is capital intensive,
8) incomplete specialization in production,
9) perfect competition in both product and factor markets,
10) perfect factor mobility only within the country, not internationally,
11) No transportation cost, no barriers to entry for trade.
Heckscher-Ohlin explanation of trade patterns begins with a specific hunch as to why product prices might differ between nations before they open trade. The theorem predicts that the key to comparative costs lies in factor proportion. If a car costs 200 tons of rice in country A and less than 200 tons of rice per car in country B, it must be because country A has relatively more of the factors that rice uses more intensively than does B.
The theory explains the comparative advantage and predicts that ‘a country will tend to export the product that use the abundant factor intensity and import the product using the scarce factor intensity. A country is relatively labor abundant if it has a higher ratio of labor to other factors than does the other country.
According to the Heckscher-Ohlin Theorem, a product is relatively labor intensive if labor costs are a greater share of its value than they are of the value of the other product. These theories were contributed to international trade by those scholars.
