Concluding Remarks

Abstract

The theory of international trade has moved closer, in recent years, to providing an explanation of the observed patterns in international trading relations as analysis of trade policy has been incorporated into general equilibrium models. Several theorists have sought to explain trade patterns by attempting to elaborate the basic Heckscher-Ohlin model to give more emphasis to demand forces. These efforts have been expertly synthesised by Johnson [31]. In fashioning a dynamic interpretation of comparative advantage, he has recognised the long-run significance of trade barriers for international patterns of trade and specialisation. Accepting that national differences in factor endowments are one source of comparative advantage, it is still necessary to discover why countries with broadly similar factor ratios can specialise and compete more successfully in different production activities. One source of differences is discontinuities at national frontiers which allow social and cultural differences. These are augmented by differences in government policies, which influence the qualities of factor inputs, through education and research programmes, as well as demand. More particularly, trade policies are used by governments to intensify the boundaries between national markets and obstruct the movements of goods (factor inputs are considered to be internationally immobile in this model).