International Trade Is An Effective Stimulation Of...

Engaging in international trade is an effective stimulation of economic growth. David Ricardo’s principle of comparative advantage argues while nations involved in international trade, a country will become specialised in producing a product that has the lowest relative costs. (Economist, 2015) By focusing on the production onto a limited scope of product or industries, firms or the nation will experience rise in productivity due to higher efficiency in allocation and utilisation of resources. As the process of specialisation will cause reallocation of other less efficient resources, nations, as a result, will import products that are less efficiently produced from other countries. While different nations specialising in different goods and services, a greater variety and cheaper products will become available for consumption, improving the quality and quantity of consumption by all nations. To determine whether developing nations are experiencing disadvantage in the internati onal trade, it requires a careful examination with Porter’s Diamond factor endowments. It analysis a nation s competitiveness under four categories: factor endowments, demand condition, related and supporting industries and firm strategy, structure and rivalry. Factor endowments meaning the availability of resources and skills, which can further categorise into basic and advanced factor. To fully utilise the potentials within a nation (Basic factor), it requires policy set by different parties suchShow MoreRelatedExport Import Technological Factor in Malaysia988 Words   |  4 Pagescom/doc/24650411/EXIM-Policy-Project 2. http://www.exim-policy.com/ 3. For India to become  a major player in  world trade, an all encompassing,comprehensive view needs to be taken for the overall development of thecountry ¶s  foreign  trade. 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