The evolution and development of the theory of free trade can be broadly divided into three stages: the first phase was a period of free competition for capitalism between the 1960s and the 1960s, when the first industrial revolution began to give rise to the theory of free trade, often referred to as the classical theory of free trade; the second stage was between the middle of the nineteenth century and the end of the second world war, when capitalism entered a monopolistic period, and the second industrial revolution brought about a major turning point in the development of the theory of free trade, which could be called the theory of modernism; the third phase of free trade theory refers to the theory of free trade after the second world war, and the emergence of a third scientific and technological revolution has brought about the innovation and comprehensive development of free trade theory。
1. The classical theory of free trade
The classical theory of free trade is based on adam smith's absolute cost theory, david ricardo's comparative cost theory and john mueller's mutual demand theory。
Smitt s. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. H. S. S. S. S. S. S. S. H. S. S. S. S. S. S. S. S. S. S. H. S. S. S. S. S. H. S. S. H. S. H. S. S. S. H. S. S. S. S. E. S. S. S. S. S. S. H. S. S. S. S. S. H. S. S. S. S. S the reason for a country's participation in the international division of labour and international trade is the absolute advantage of the country in the production of a particular commodity。
Research findings and major pitfalls based on absolute cost theory were complemented and developed by ligatu's theory of relative cost, which answers the problem that the absolute cost theory does not address. Li gato points out that when one country is at an absolute disadvantage (advanced) in the production of both products compared to another, it is still eligible (necessary) to participate in free trade as long as its comparative costs for both products differ from those of another. The central point of the comparative cost theory is that each country would have a comparative advantage, or comparative advantage, and would have comparative benefits through trade. The comparative advantage here is the greater absolute advantage and the lesser absolute disadvantage, namely, that of "two advantages over the weight and two disadvantages over the light". With regard to the distribution of trade benefits, the british economist mueller provided some explanation using the principle of mutual demand. First, using the principle of comparative advantage, he explained that the actual terms of trade were bound to fall between the upper and lower limits set by the ratio of exchange of two commodities within the two countries, beyond the upper or lower limits and that international trade would not occur. Secondly, he concluded that the actual terms of trade depended on the strength of the relative demand for each other's goods by the trading countries. Foreign demand for domestic goods is more intense than domestic demand for foreign goods, and the actual terms of trade are close to the ratio of exchange between these two commodities within foreign countries, which is beneficial to the country. Conversely, if domestic demand for foreign goods is more intense than foreign demand for domestic goods, the actual terms of trade are close to the ratio of exchange of these two commodities within the country, which is beneficial to the foreign country。
2. Theories of free trade in modern schools
The modern theory of free trade is based on the factors of production proposed by hector and olin. The doctrine and the subsequent conundrum of lyons as a departure from factor endowments are the main lines of development。
The main content of the factor endowment doctrine, also known as the he-russian model, is that the production of different commodities requires different factors of production, whereas different countries have different factors of production, so that a country should produce and export goods that make intensive use of its more abundant factors of production in exchange for imported goods that require intensive use of its more scarce factors of production, the prices of which will be levelled as a result of the movement of goods and factors of production and their further development or because one of them encounters less resistance。
In the early days, lyonsof was convinced of the he-russian doctrine, according to which a country with more capital should produce and export capital-intensive products, while importing labour-intensive products produced by scarce labour factors. Based on this understanding, he used input-output analysis to make specific calculations of the foreign trade commodity structure of the united states, with the aim of validating the hero-russian doctrine. It was found that, as the world's most capital-rich country, the united states exported labour-intensive products and imported capital-intensive products, i. E. Factor differences did not effectively determine the way trade was conducted. This huge departure from the he-i-russia doctrine and trade practice, discovered by leon schulf, has shocked the american and european international trade community by what is known as the conundrum of lyons or the lyons paradox. The charade of lyons triggered a large-scale debate and validation in western economics, which led to the innovation and development of free trade theory after world war ii。
3. Theories of free trade after world war ii
The post-world war ii theory of free trade, based on its causes, can be divided into two main groups: the first group, created to explain the puzzle of lyons, is called the new element of trade theory; the second group emerged to explain the new pattern of international trade, which could be called the new theory of international trade. According to the new etp, human skills and technological advances also play an important role in international trade when considering the comparative advantages of goods in international trade. It is the development and supplementation of factor endowments, different from the new content of factors of production, which break the original limits, and which consist mainly of human capital, human skills and technology gaps. With regard to innovation in the theory of international trade, which is limited to the length of the articles, the present paper presents only the theory of the causes of international trade. They include, inter alia, the theory of similar demand, the theory of economies of scale, the theory of product life cycles and the theory of intra-industry trade. Let us begin with an analysis of contemporary international trade practices, and the findings show that there are three remarkable trade facts that cannot be ignored: the increasing share of knowledge-intensive products in the total volume of international trade — the intellectualization of trade products; the assimilation of the economic structures of industrialized countries; and the dominance of intra-sectoral trade. These are unexplainable and unforeseeable from traditional trade theories. In response to these major changes, the new theory of international trade provides some convincing explanations。
