The International Trade Theory

International trade theory explains how and why countries trade goods and services. It suggests that nations benefit by specializing in producing items for which they have a comparative advantage—meaning they can produce more efficiently or at a lower cost—and then exchanging these goods with others. This specialization leads to increased efficiency, greater variety of products, and overall economic growth for all parties involved. The theory also considers factors like tariffs and trade barriers, which can influence international exchanges but generally aim to enhance a country's economic well-being.