Abstract

Over the past century, international trade theories have testified to an increasing role in knowledge. Depending on the classical trade, theories of Adam Smith in 1776 and David Ricardo in 1817 based on labor while an element of cost, neoclassical contributions made possible to take the capital and other production factors into account through the concept of opportunity cost and undermining knowledge. The paper referred to the Mercantilism definition history and how it affects foreign trade factors. Besides to the research paper indicates the modern trade theories of Heckscher-Ohlin-Samuelson, which used two factors model that only included labor and capital. As of the 1960s, parallel to the debate over the Leontief Paradox and new international trade theories began to cover knowledge and related concepts like skilled labor and technology gap, product cycle and others. Moreover, the study builds on a review of the literature on classical trade theories as an example of comparative advantage to the new trade theories currently used by many advanced countries to direct industrial policy and trade. As a result, the study discusses that classical trade theories are still relevant now and considers how modern trade theories contribute to understanding trade patterns and benefitting from them in the world. Keywords: International Trade Theories, Development, Classic Theory, Global Economy

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