This model stipulates that the trade (TR) between regions i and j depends on the price
in country i (pi), the price in country j (pj), any tariffs between the two areas (Tij) and
the cost of freight (Fij). So all we have to do is explain why products produced overseas
cost less than their local counterparts. Of course, there are an infinite number of
specific circumstances, but as far as explaining global sea trade of the type we reviewed
in Tables 10.1 and 10.2 is concerned, three stand out: differences in manufacturing
costs, differences in local natural resources, and temporary shortages or surpluses
which disrupt the normal pricing process. We will consider each of these in the following
sections, but a brief preview puts them into perspective: