Topic

Theories of Trade

Country-based trade theories

International commerce theory that is classical and country-based in nature, and which claims that a country's wealth is defined by its gold and silver holdings. The situation in which the value of exported goods exceeds the value of imported goods. It occurs when the total value of imported goods exceeds the total value of exported goods.

example

: Consumer products, such as television sets and apparel, as well as capital goods, such as equipment, as well as raw materials and food, are among the commodities that are often exchanged.

Industry based Trade Theories

A contemporary, firm-based international commerce theory that claims that a product life cycle includes three separate stages: (1) the introduction of the product, (2) the maturing of the product, and (3) the standardization of the product. The difficulties that a new company may have while attempting to enter a new sector or market.

example

foodstuffs generated by the food processing industry

Question-1a

Choose a country that is a major trading partner of Mozambique and describe the main trading relationships that exist between the two countries.

https://oec.world/en/profile/country/mozFor assistance

Answer

INDIA

In recent years, India and Mozambique's bilateral ties have grown dramatically. In August 2015, President Filipe Nyusi of Mozambique paid a state visit to India, re-igniting a cycle of high-level visits between the two nations. At the IAFS-III in New Delhi in October 2015, Mozambican Prime Minister Carlos Rosario paid a state visit to India. After Indian Prime Minister Shri Narendra Modi's State visit to Mozambique in July 2016, the friendship has continued to grow. The number of Indian firms operating in Mozambique has continuously increased, with more than 50 already operating in the country. Indian investments in Mozambique comprise roughly USD 8 billion, which is nearly 25% of India's investments in Africa. The number of Indian firms visiting Mozambique for commercial purposes has increased as a result of this growing interest. Trade between India and Mozambique increased from USD 634.82 million in 2011-12 to USD 3.0 billion in 2019-20, according to statistics from the Department of Commerce. Trade climbed to USD 2.1 billion in the interim (2014-15). Indian exports to Mozambique declined substantially in 2015-16 to USD 1.2 billion, then fell even more in 2016-17 to USD 1 billion. FY 2019-20 saw an increase of USD 2.17 billion. The decline in the price of petroleum (refined petroleum products account for around 75 per cent of Indian exports to Mozambique) and a foreign currency crisis in Mozambique have contributed to this drop. Exports from India to Mozambique, in contrast, have increased steadily, from USD 363 million in 2015-16 to USD 546 million in 2016-17 to USD 1.09 billion in FY 2018-19. Mozambique's exports to India have remained flat. USD 835 million was reduced to USD 835 million in the fiscal year 2019-20. Due to a rise in the export of coking coal, Mozambique's exports grew from 2015-16 to 2018-19. India is the largest importer of coking coal from Mozambique, which accounts for 67% of the total. Apart from oil, Indian exports to Mozambique include medicines, textiles, and equipment. Mozambique had a trade surplus with India in both 2017-18 and 2018-19.

Question-1b

Choose a country based theory of trade (not the Theory of Absolute Advantage) and explain the main concepts of the theory and illustrate your explanation with examples of trading relationships between the two countries you used in Part 1a.

Choose an industry-based theory of trade and explain the main concepts of the theory and illustrate your explanation with examples of trading relationships between the two countries you used in Part 1a.

Please Answer 1b