Introduction:

International Trade is that the exchanging method of goods and services across the international border. In 2010, the worth of international tread achieved 19 trillion (US) dollars that is about 30% of the world GDP. That is almost one third of production of goods and services are exchanged internationally around the world. International trade is the exchange between two folks or entities in two different countries. International trade theories are completely different type of theories that give explanation on international trade.

In 1600 and 1700 centuries, mercantilism concerned that countries ought to at the same time encourage exports and discourage imports. Though mercantilism is Associate in tending previous theory it echoes in fashionable politics and trade policies of the many countries. The classical social scientist Smith, United Nations agency developed the idea of absolute advantage, was the primary to elucidate why unrestricted trade is useful to a rustic. Smith argues that the invisible hand of the market mechanism, instead of government policy, ought to confirm what a rustic imports and what it exports.

Heckscher-Ohlin theory is mainly popular on theoretical grounds, however in real-world international trade pattern it clothed to not be simply transferred, observed because the Wassily Leontief contradiction in terms. Another theory attempting to elucidate the letdown of the Hecksher-Ohlin theory of international trade was the product life cycle theory developed by Raymond Vernon.

Theories of International trade:

Mercantilism:

According to Wild, 2000, the trade theory that state th