Globalization and International Trade Theories
In the 1960’s, the US was hurdling head long into the space race. During those years the Berlin Wall stood, the cold war was real and news rang around the world of the US Invasion of the Bay of Pigs. Nations were very independent of one another and the US was by far the world’s largest economy with domestic exports exceeding imports. Fast forward to today and the world is quite a different place. My assignment is being prepared on a notebook computer sold by a US company with assembly plants located in several regions in the world that put together components manufactured in more than 30 countries (Kraemer & Dedrick, 2002). Today, economies are intertwined as experienced earlier this year when the Nikkei 225 fell to lowest since 2005 on sub-prime woes in the US (Shiyin, 2008). Cultural globalization can be explained as a phenomenon by which the experience of everyday life, as influenced by the diffusion of commodities and ideas, reflects a standardization of cultural expressions around the world (Encyclopædia Britannica, 2008).
How nations and business look at international trade has changed. Traditional international trade theories include Mercantilism of the 16th and 17th centuries, Adam Smith’s theory of absolute advantage of the late 18th century, David Ricardo’s theory of comparative advantage of the 19th century, the basis for the modern argument of unrestricted free trade, and the 20th century Heckscher-Ohlin theory, a refinement of Ricardo’s work (Hill, 2005). While each of these theories embrace some level of international trade, the theories of Smith, Ricardo, and Heckscher-Ohlin argue an international trade policy that supports globalization.
Major Drivers of Gl ...