3.5 Summary: Part A
Trade theories have important implications for international business. They have been developed in response to a desire to predict the future course of events with reasonable accuracy. Also, an understanding of these theories helps to explain the rationale for the pursuit of different trade policies by different nations over time. For example, mercantilism, developed in the sixteenth century, is practised today in France , albeit in an attenuated way. For a business firm, the life-cycle theory can provide a framework for scrutinising likely products for export. From the perspective of an international body such as the United Nations or World Trade Organisation, models such as Porter's should enable us to predict the pattern of future international trade.
These theories are useful in assisting international managers and governments and they are helpful in understanding how and why different policies influence the course of events. It is important to keep in mind that they are abstractions from reality. They provide us with a framework for analysis but, to be useful, that framework should be employed with the additional information gathered about specific problems in the real world.
A useful summary of a number of trade theories we have discussed is provided in Figure 3.2 to assist you in revision.
Figure 3.2 The evolution of trade theory
Source: Czinkota et al. 2004, p. 152.
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