International Trade Theory Essay Example | Topics and Well Written Essays - 500 words

International Trade Theory - Essay Example 235). This novel trade theory has two significant implications. First, on account of the impact of trade on economies, it can enhance the choice of goods available to consumers, while reducing their cost. Second, if the production required for achieving economies of scale is of the order of the global demand, then only a few enterprises will obtain support (Hill & Jain, 2008, p. 235). Consequently, global trade in some commodities could possibly the preserve of the firms who had initially taken the initiative. There are a number of models that relate to international trade, and these models are dealt with in International Trade Theory. The principal objective of these theories is to explain the various ideas that pertain to the transfer of goods and services, across the world. Although, these theories have changed over time, the fundamental principle underlying international trade is more or less similar to the principle, on which domestic trade is founded (International Trade Theory and Policy). In essence, the chief purpose of trade is to maximize profits for the entities involved in the exchange of goods and services. A number of forms are assumed by the economic integration of countries. Some of these are preferential tariffs, customs unions, free – trade associations, common markets, economic unions and complete economic integration. Nations belonging to a specific system of preferential tariffs, levy a higher rate of duty on imports on countries that do not belong to their group. This was evident among the Commonwealth countries, which had established a system of common tariff preferences, subsequent to the year 1919 (Allais, Balassa, Bertrand, Robinson, & Wonnacott, 2011). Unique solutions to economic problems are not possible, as long as competition and trade occur in an environment that is imperfect from the economic perspective. The result of economic endeavors becomes dependent on the behavior of the