Classical theories of international trade and their evolution

The centuries-old history of world trade is based on the tangible benefits it brings to the participating countries. During this period, explanations of cause and effect have developed into concrete theories. The general theory of international trade gives an idea of what underlies this benefit from foreign trade or what determines the directions of foreign trade flows.

To date, two main types of theories of world trade have been developed.

The first type of theory determines the natural course of trade, studies and explains what structure of trade would operate if trade between countries were free. Theories of this type raise questions: to what extent, to what products, with whom will a given country trade in the absence of any restrictions? This is the theory of absolute advantage and the theory of relative advantage.

The second type of theory prescribes government intervention in the free flow of goods and services between countries in order to change the volume, composition, and direction of trade. These are such theories as mercantilism, neomercantilism, dependency theory, etc.