The World Financial Center Of Southeast Asian Nations

1727 Words Jun 11th, 2015 7 Pages
According to traditional trade theorists such as David Ricardo and Heckser-Ohlin, trade was only plausible and could only lead to mutual gains if countries had different technologies or differed in their resources (Emanuel Larao Pg. 2). They believed that trade could only consist of inter-industry trade, which was the exchange of goods in different product categories. Heckscher-Ohlin more specifically believed that trade could still be beneficial between two countries, if a country that was endowed with an abundance of capital; the country exported capital-intensive goods to a country that had an abundance of labor. The country with an abundance of labor would then export the labor to the country with an abundance of capital goods and import capital-intensive goods (Andrew Clark Pg.3). Two countries that adopted these characteristics are Malaysia and Singapore after 1992 when the association of Southeast Asian Nations (ASEAN) signed the ASEAN free trade agreement (Andrew Clark Pg.6). Singapore has been know to be the world financial center and is more capital abundant. This is demonstrated by (K/L)S > (K/L)M. Malaysia however, is more labor abundant and employs the (L/K)S < (L/K)M theory. When discussing Labor and Capital abundance the 2x2x2 model cannot be excluded. This model says that there are two countries (Singapore and Malaysia) two goods (x and y) and two factors of production (capital: K and labor: L). When (w/r)S > (w/r)M, Singapore is said to be capital abundant…
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