Inter regional VS International Trade
There is another consequence of comparative immobility of labour andand capital as between one country and another: “Within a country. the price of a commodity. in the long run, tends to approximate to its cost of production. This is so because labour and capital can easily move into O’f move out of an industry.if the price is respectively more or less than the cost of production.This cannot happen in the case of international trade. Labour and capital being immobile. price and cost of production can seldom approximate. internationally is that return to factors tend to
equality within. but not between Natural Endowments. Differences in advantages
of trade to different countries ma y arise because of natural causes like geographical and climatic conditions.
These lead to territorial division of labour and localization of industries. For instance. some countries may have particular mineral resources like coal. iron ore. copper etc. Others may have land or climate peculiarly suitable for certain crop jute in Fungal Either these advantages cannot be transcend to other countries at all or the cost of moving them is prohibitive Some have greater skill and dexterity and others excel in spirit of enterprise ivc and organisational ability.Stor!, or Capital. Some countries possess large stock of capital goods like the U.K and the U.S.A. ,1i1 Others like India suffer from capital deficiency. This makes a great difference in the type of goods produced in different countries. 1 SIlH recently. In international trade. certain problems arise out of the fact that countries are independent sovereign States and can pursue independent policies with respect to thc movement of goods, wages and prices. fiscal matters, banking law. foreign loans. etc. Several kinds of restrictions may be placed on the movement of goods beyond their fruticans by the States.
Economic Nationalism. Different countries have their separate national economic life. “Along with political independence has grown a demand for economic self-reliance. self-esteem expressed largely in plans and hopes for economic development.” the national units have been striving for increasing consumption.
production. capital formation, etc. Thus. political and economic nationalism is rising especially in newly independent countries widening the difference between
international and inter-re gional trade.Trade and Exchange Controls. We find that
trade and exchange controls are instituted by almost all modem States which obstruct the movement of goods and services from one country to another. This also
necessitates a separate theory of international trade.AI/these difference give rise to a separate theory of international trade.