Consider global agricultural production. The US is the second largest global exporter of food by dollar value. The tiny country of the Netherlands is the second with only a fraction of the land available. Using your knowledge of trade theories choose one trade theory that best explains this phenomenon. In your answer discuss why you chose this theory over alternatives.

use from the trade therories listed below.

Mercantilism- It is a classical trade theory that takes an us-versus-them view of trade. It prevailed during the period in between 1500-1800 (Magnusson 2019). Under this theory, the government intervenes for achieving a surplus in the exports. It is the government that is the exporter of goods. It is aimed at creation of trade surplus that further aids to the accumulation of the nation's wealth.

Absolute advantage- Absolute advantage is all about the ability of a nation for producing goods and products more cost-effectively and efficiently compared to any other

INTRODUCTION TO GLOBAL BUSINESS

nation. For example, India has an absolute advantage in terms of operating many call centres compared to the Philippines due to its low labour cost and ample of labour force.

Comparative advantage- It is the ability of a nation to produce a particular service or good at lower marginal cost and opportunity cost over the other nations (Laursen 2015). These goods and services have low cost of opportunity for the other nations to import. For example, the oil-producing countries have a comparative advantage in the field of chemicals.

Factor proportions theory- As per this theory, the factor intensities is based on the state of technology as well as the present method of manufacturing a particular product. It states that the same technology of goods production can be used for same goods in all the nations.

International product lifecycle theory- This theory of international trade comprises of four stages and they are introduction, growth, maturity and decline. It briefs about how a firm evolves over the passage of time and across the national borders (Gmelin and Seuring 2014). Duration of each stage is based on the costs of production, demand from customers and revenues. For instance, the Philips light bulb remained in maturity stage for decades.

New trade theory- New trade theory is one of the international trade theories that explain the relations among the natural country advantages, industry characteristics and government actions, which enable the exchanges to take place.

National competitive advantage theory- It was developed by Micheal Porter and it states that the feature of home nation are important for the success of a company in host nation. The determinants of national advantage according to this theory are factor conditions, demand conditions, firm strategy, rivalry and structure and the other supporting and related industries.