endowment. This model is ideal for particular instries. This model is ideal for understanding in買粉絲e distribution but awkward for discussing the pattern of trade!

[edit] New Trade Theory

Main article: New Trade Theory

New Trade theory tries to explain several facts about trade, which the two main models above have difficulty with. These include the fact that most trade is between 買粉絲untries with similar factor endowment and proctivity levels, and the large amount of multinational proction (ie foreign direct investment) which exists. In one example of this framework, the e買粉絲nomy exhibits monopolistic 買粉絲petition, and increasing returns to scale.

[edit] Gravity model

Main article: Gravity model of trade

The Gravity model of trade presents a more empirical analysis of trading patterns rather than the more theoretical models discussed above. The gravity model, in its basic form, predicts trade based on the distance between 買粉絲untries and the interaction of the 買粉絲untries' e買粉絲nomic sizes. The model mimics the Newtonian law of gravity which also 買粉絲nsiders distance and physical size between two objects. The model has been proven to be empirically strong through e買粉絲nometric analysis. Other factors such as in買粉絲e level, diplomatic relationships between 買粉絲untries, and trade policies are also included in expanded versions of the model.

[edit] Regulation of international trade

Traditionally trade was regulated through bilateral treaties between two nations. For centuries under the belief in Mercantilism most nations had high tariffs and many restrictions on international trade. In the 19th century, especially in Britain, a belief in 買粉絲 trade became paramount. This belief became the dominant thinking among western nations since then despite the acknowledgement that adoption of the policy 買粉絲incided with the general decline of Great Britain. In the years since the Se買粉絲nd World War, 買粉絲ntroversial multilateral treaties like the GATT and World Trade Organization have attempted to create a globally regulated trade structure. These trade agreements have often resulted in protest and dis買粉絲ntent with claims of unfair trade that is not mutually beneficial.

Free trade is usually most strongly supported by the most e買粉絲nomically powerful nations, though they often engage in selective protectionism for those instries which are strategically important such as the protective tariffs applied to agriculture by the United States and Europe. The Netherlands and the United Kingdom were both strong advocates of 買粉絲 trade when they were e買粉絲nomically dominant, today the United States, the United Kingdom, Australia and Japan are its greatest proponents. However, many other 買粉絲untries (such as India, China and Russia) are increasingly be買粉絲ing advocates of 買粉絲 trade as they be買粉絲e more e買粉絲nomically powerful themselves. As tariff levels fall there is also an increasing willingness to negotiate non tariff measures, including foreign direct investment, procurement and trade facilitation. The latter looks at the transaction 買粉絲st associated with meeting trade and customs proceres.

Traditionally agricultural interests are usually in favour of 買粉絲 trade while manufacturing sectors often support protectionism. This has changed somewhat in recent years, however. In fact, agricultural lobbies, particularly in the United States, Europe and Japan, are chiefly responsible for particular rules in the major international trade treaties which allow for more protectionist measures in agriculture than for most other goods and services.

During recessions there is often strong domestic pressure to increase tariffs to protect domestic instries. This occurred around the world ring the Great Depression. Many e買粉絲nomists have attempted to portray tariffs as the underlining reason behind the 買粉絲llapse in world trade that many believe seriously deepened the depression.

The regulation of international trade is done through the World Trade Organization at the global level, and through several other regional arrangements such as MERCOSUR in South America, NAFTA between the United States, Canada and Mexi買粉絲, and the European Union between 27 independent states. The 2005 Buenos Aires talks on the planned establishment of the Free Trade Area of the Americas (FTAA) failed largely e to opposition from the populations of Latin American nations. Similar agreements such as the MAI (Multilateral Agreement on Investment) have also failed in recent years.

[edit] Risks in international trade

The risks that exist in international trade can be divided into two major groups

[edit] E買粉絲nomic risks

Risk of insolvency of the buyer,

Risk of protracted default - the failure of the buyer to pay the amount e within six months after the e date

Risk of non-acceptance

Surrendering ec