International trade is conducted cross border trade. State produces some of its own needs and export the excess, then import what is not produced. We may wonder, why the state of international trade, instead of enjoying all the results of its own production? If a country that has a very comprehensive resource, would not it be better to use it to produce all its own, so she does not need to export and import?

The reason the state of international trade based on the theory of Comparative advantage (comparative advantage), which will be explained further below. But simply, the trade will create a specialization, that each country can specialize in certain goods and services. Specialization will increase productivity, which in the long term will improve the living standards of all countries involved. International trade is a way for countries to prosperity. (more…)