Essay by Jumeesa2 April 2008

download word file, 5 pages 4.0

1. What is globalization, and what are some of the traditional international trade theories that support the concept of globalization?For centuries, people have crossed international borders to trade and bargain for products around the world. This was, quite possibly, the beginning of globalization. In today’s world consumers and businesses have greater opportunities to acquire what they need, through advances in technology and transportation. Globalization is the concept and process by which product, labor, technology, and cultures in the global economic marketplace are continual merging (Hill, C.W.L., 2005, p. 6). In previous times, the aforementioned were segregated, or undiluted, in their particular region around the world, kept distant mainly because of geography and prejudice. Now, people around the world are more willing, and certainly more able, to obtain goods and services in many different areas from many different cultures.

Trade theories such as, absolute advantage, comparative advantage, and the Heckscher-Ohlin theory state that countries can benefit from free trade.

When a country’s efficiency in producing a product supersedes any other country, they have absolute advantage. Free trade would allow that country to trade with another country that has absolute advantage with another product. Comparative advantage is similar to absolute advantage however; it takes on the idea of only producing the specialized goods while purchasing less demanded goods from other countries, even though that product could be made in their home country (Hill, C.W.L., 2005).

Free trade eliminates taxes or other obstacles to the free flow of goods and services. Lower or no trade restrictions supports globalization by means of allowing businesses to reach a larger economy base as well as giving countries greater opportunity in the exportation of their indigenous goods and importation of needed goods and services, as demonstrated in the Heckscher-Ohlin theory. In addition, extending commerce across international borders...