The Pattern of Trade
Economists cannot discuss the effects of international trade or recommend changes in government
policies toward trade with any confidence unless they know their theory is good
enough to explain the international trade that is actually observed. As a result, attempts to
explain the pattern of international trade—who sells what to whom—have been a major
preoccupation of international economists.
Some aspects of the pattern of trade are easy to understand. Climate and resources
clearly explain why Brazil exports coffee and Saudi Arabia exports oil. Much of the
pattern of trade is more subtle, however. Why does Japan export automobiles, while the
United States exports aircraft? In the early 19th century, English economist David Ricardo
offered an explanation of trade in terms of international differences in labor productivity,
an explanation that remains a powerful insight (Chapter 3). In the 20th century, however,
alternative explanations also were proposed. One of the most influential, but still controversial,
explanations links trade patterns to an interaction between the relative supplies
of national resources such as capital, labor, and land on one side and the relative use of
these factors in the production of different goods on the other. We present this theory in
Chapter 5. Recent efforts to test the implications of this theory, however, appear to show
that it is less valid than many had previously thought. More recently still, some international
economists have proposed theories that suggest a substantial random component in
the pattern of international trade, theories that are developed in Chapters 7 and 8.