Classical And Neo Classical Trade Theories

1940 Words Jan 28th, 2015 8 Pages
Introduction

This report will analyse classical and neo classical trade theories and apply them to Bangladesh and the United States. I believe these two nations to be vastly different in many aspects including trading and power. With a current trading relationship between the two nations, it is possible to compare. This research will allow me to see the impact free trade has on developed and undeveloped nations. There are potential barriers to trading such as cultural difference and languages that often cause breakdowns in trades. However, international trading has helped increase cultural knowledge and difference around the world. “Free trade is one of the greatest blessings which a government can confer on a people, is in almost every country unpopular.” (Irwin, D.A (2009). Free trade will always have sceptics, however it offers opportunities domestic trading never can.

History of free trade

The concept of free trade thought up by Smith, who came up with the notion of countries trading with one another. He believed that if two countries both specialise in different products and trade with one another it would be beneficial to both. Many people were sceptical at the time because it was the 19th century and international travel was very limited. Smith believed trade barriers should be reduced however, communication between countries was restricted. Ricardo’s agreed with Smiths concept and adapted his own model comparative advantage. However, some…
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