Globalization And International Trade Theory

During the eighteenth century European countries were characterized by an increased population, maintained a wealthy economy, and revolved around a new way of thinking. There have been several theories that had an impact on European societies. Two of the theories include mercantilism and Adam Smith’s viewpoints. Mercantilism came about as a way to gain power and wealth society, where as Smith relied on a laissez-faire approach. Each of these theories had a major impact on the development of the European society; although there were many struggles they became a stepping stone to the democracy, and trading connections we possess today.

In this chapter, talks about Globalization and Trade. Wheelan starts by using the example of a magical machine that turns corn into stereo equipment. “Imagine a machine that can convert corn into a stereo equipment”. He says that no matter where in the world you look, trade is a machine that can turn anything into anything else. In trading we are practically taking what we produce and turning it into what we can’t or do not produce. The best part of the trade machine is that it allows countries to specialize in producing just one good and then taking that one good and turning it into another good. Since in the trade machine you just need one thing to get whatever you want, you basically take whatever you are better at and focus only on producing that in order to trade it with different people that can offer you what you lack. This is the heart of trade, specialization.

Mercantilism is an economic theory where a nation's strength comes from building up gold supplies and expanding its trade. Britain formed the American colonies so that they could increase their gold stores. They wanted raw supplies to make into products to sell and make money. They wanted America to pay taxes so that Britain could make money. America used the theory in that they thought they ought to, in order to be strong expand their trade beyond Britain. Countries like Belgium, and France wanted to also increase their trade, and expand it to trading with America. They also wanted to increase their gold stores by trading with America. Britain however did not want America to trade with France and Belgium and the Netherlands because they

Trade: It is a widespread fact that international trade has increased to unprecedented levels as compared to the nineteenth century. However, it was an era of rapid trade growth, cultural ties and aftermath of Age of Exploration. After the post-World War period, an extensive

Theodore Levitt is often considered to be the first to recognize the trend towards globalization and states that: “companies must learn to operate as if the world were one large market – ignoring superficial regional and national differences…” In addition, he argues that the companies that do not adapt to the new global realities will become the victims of those that do.

But first, we must take into consideration the role population growth played. After the Bubonic Plague occurred the population boomed to a new high and with that new high came urban centers. In these urban centers, forms of currencies became a standard. People began to buy goods from others and mercantilism became the new standard for the economy of many nation states. Mercantilism, which reached its height in the Europe of the seven¬teenth and eighteenth centuries, was a system of nationalism, which em¬ployed economic fallacy to build up a structure of imperial state power, as well as monopolistic privilege to indi¬viduals or groups favored by the state. Thus, mercantilism held that exports should be encouraged and imports discouraged. It was simply a simplified version of capitalism in a

The accelerating pace of international trade is one of the most dominating, and important features, of contemporary life. Globalization is creating widespread changes for societies, economics, and governments. Since the invention of the steam engine, transportation and communication limits have faded away and, with the development of the Internet, practically disappeared. A case can be made for the proposition that trade, throughout history, has been the main engine for the development of the world as we know it today. In his book, A Splendid Exchange: How Trade Shaped the World, William J. Bernstein makes this case.

Mercantilism stretched over nearly three centuries, ending in the last quarter of the eighteenth century. It was the period when the nation-states were consolidating in Europe. For the purpose of consolidation, they required gold that could best be accumulated through trade surplus. In order to achieved trade surplus, their governments monopolized trade activities, provided subsidies and other incentives for export, and restricted imports. Since most European countries were colonial powers, they imported low cost raw material from their colonies and exported high cost manufactured goods to the colonies. They also prevented colonies from producing manufacturing. All this was done in

Mercantilism is a system in which the imperial governments used military power to enrich themselves and their supporters, they then used those riches to enhance their military power. This then established monopolies that controlled trade and other economic activity. Thomas Hobbs related it to wealth and power stating that “wealth is power and power is wealth.” Saying that foreign trade produces riches and power. When Western Europe created this new trade system, they assumed that it would help progress the nation’s power and their control over the import and export of goods. This system was intended to control and propagate their nation’s economy. This was a very sneaky and different way of trading this trade systems. This system would reduce

Mercantilism can be defined as a theory created British authorities that was an economic system that ensured their control that they had over the colonies. As the statement by a Historian says, “Mercantilism” was actually more favorable to the colonies than to Great Britain”, I would have to disagree. Although it is true that there was benefits for the colonies, the benefits of the mercantile system for Great Britain outweighed the little positive effects that it had on the colonies. The British benefitted greatly from the income that was gained by enforcing this system on the colonies and the effects that were to come after it was created. This essay will expand on the characteristic of mercantilism and how Great Britain was affected positively by the system.

Mercantilism has been nicknamed the economics of absolution. Mercantilism is the theory that a countries power depends mainly on its wealth, the power to build large and formidable navies and lastly the control and purchase of vital trade goods and routes. The two main ways to increase a countries wealth is to obtain as much gold and silver as possible and to establish a favorable balance of trade that sells more goods than it has to buy. In Mercantilism buying more than you are selling will lead to an unfavorable balance which will lead to a national dept. Europe in early history utilized mercantilism which lead to the creation of colonies. The soul purpose of a colony is to support and benefit the mother country. A good example of this is North America, North America had untapped raw resources such as minerals, metals and trees; it is worth noting

Mercantilism is a political and economical system that continued on the 16th to late 18th century. It means that a country’s economic power is related to the maintenance of a positive balance of trade. That is, in order to remain economically and politically exist, a country most export more than it imports. Such a positive balance of trade, according to mercantilist thought, causes the gold to surplus in the country’s treasury. So as to achieve these, international trade must be done. Key ideas of mercantilism is that national wealth will came through the accumulation of gold or other precious metals such as silver. They can be acquired by export. Raw materials were imported and final products were exported to provide a positive balance of trade. Colonial possessions should serve as markets for exports and as suppliers of raw materials

Economists of all time, either classical, new classical or modern, have never denied the importance of external trade. International trade have been considered as a back bone of the economy of any country. The issue of trade and free trade has been at the prime agendas of economists' for over last two centuries. David Ricardo and Adam Smith talked about the importance of free trade, and given Comparative and Absolute Advantage theories. Free trade or globalization is a hotly debated phenomenon in the world economic system of 21st century. If the economic affluence and economic growth of all the nations of the world could be brought at par with each other by the free flow of goods and services, irrespective of boundaries, under the free trade banner, then it is a situation for which, every country should struggle for. Bilateral trading arrangements, although less preferred to multilateral ones, are one of the instruments employed by both developed and developing countries, to protect their export markets and to guarantee their trading activities in the future.

Considering as one of prominent aspects of the globalization process, free international trade has over 100 years in the development history (Lawal 2006; Ocampo & Martin 2003). At the first stage, free trade was happened within the North and South America countries, then together with the development of the world economy, trade liberalization has expanded to almost areas of the world (Ocampo & Martin 2003). The most expansive and extensive period of trade liberalization is from the second half of the twentieth century to present. In this period, trade liberalization, with support from innovations in transportations and information technologies, is characterized by the rapid expansion of trans-boundary free trade and international investment among almost developed and developing (Ocampo & Martin 2003).

With the development of science and technology as well as transportation, economic and trade globalization in gradually, most companies are not satisfied with the domestic market, and began to open up markets in other countries, which is the origin of multinational enterprises. However, since the environment of the market is different from the host country, such as natural conditions, socio-cultural, or customer needs, which is particularly difficult to deal with the situation when to enter the market of a country, it will need to face the corresponding political risk. Political risk is a type of foreign exchange risk, thence, a prerequisite of political risk and foreign exchange risk of the occurrence of a prerequisite is the same, namely businesses or investors must hold foreign direct investment (Foreign Direct Investment), otherwise, there would not be political risks (Jensen, 2003). Therefore, for multinational enterprises, the economic benefit was on the most important position, and even beyond the political relations such as social system, human ideology, or challenge the traditional, however, for the country to say that in terms of national security goals happen with the economic interests if they have conflicting objective, the state will first meet the security objective, it would be more stressful for multinational enterprises in political risk.